Indian Stock Market: US Fed rate cut to boost Treasury yields – 5 key concerns investors should not ignore

Indian Stock Market: The Indian stock market correction, which began in October last year, has remained unsustainable as a confluence of factors – including inflated valuations, weak quarterly earnings, a strong US dollar, rising bond yields and slow economic growth – are troubling investors. Still working. ,

On a monthly scale, the benchmark index, Nifty 50, has been falling since October. It is down 11 per cent from its all-time high of 26,277.35, reached on September 27 last year.

The short-term outlook appears challenging, with many headwinds ahead. However, experts remain optimistic about the prospects of the Indian stock market in the medium to long term.

“Markets are under pressure, with even minor fluctuations attracting selling pressure,” said Ajit Mishra, SVP of Research. In the absence of any clear sign of trend reversal, especially in the banking indices. “, traders are advised to use rebounds as shorting opportunities.” In Religare Broking, said.

“Caution should remain a priority with a focus on strong risk management. Additionally, as the earnings season begins, erratic market fluctuations are likely to intensify. Adopt a hedging approach to deal with the current conditions. And maintaining disciplined position size is recommended.” Mishra said.

5 major concerns for Indian investors

Stock market experts highlight five major concerns indian stock market Investors should not ignore.

1. Interest rate path of the US Federal Reserve

Further rate cuts are expected by US Fed are decreasing. Minutes from the US central bank’s last policy meeting indicate that policymakers see little prospect of additional rate cuts, as they expect inflation to rise in 2025.

Recent US macro data has indicated that the US economy remains strong, weighing on the likelihood of a rate cut. Meanwhile, job growth in the US has exceeded estimates, raising doubts about a Fed rate cut in the near future.

The data showed jobs rose by 256,000 in December, much more than the 160,000 expected by economists in a Reuters poll. The unemployment rate decreased from 4.2 percent to 4.1 percent.

2. Trump Factor

donald trump will take charge on 20 JanuaryTheir policies on tariffs will be a major factor that will decide the direction of the global market. At present there is uncertainty in the market regarding Trump’s policies.

VK Vijayakumar, Chief Executive Officer, said, “Global uncertainty is related to the possible actions of President-elect Trump. Trump’s announced announcements – increasing tariffs, curbing inflation and tax cuts – are inflationary. Hence, his tax cuts “There is no possibility of implementing anything except that.” The investment strategist at Geojit Financial Services observed.

“The markets have partly ignored Trump’s threats, as reflected by the dollar index rising to 109 and the 10-year US bond yield rising to 4.79 percent. If Trump had chosen to negotiate after taking office If so, the dollar index and bond yields may start coming up. From the Indian market perspective, this could be positive as FIIs will stop selling in such a scenario,” Vijayakumar. Said.

3. Tightening of US treasury yields

The sustained rise in US Treasury yields, amid growing expectations of a narrow path of Fed rate cuts, has been a major reason behind the massive outflow of foreign capital from the Indian market. So far in January, foreign portfolio investors (FPIs) have sold Indian equities of approx. After selling about Rs 21,350 crore 46,000 crore more shocking in November 1,14,446 crore in October.

The benchmark US 10-year bond yield recently rose to 4.79 percent, its highest level since November 2023.

When bond yields rise in the US, FPIs sell risky equities of emerging markets like India and invest the money in US Treasuries as they offer almost risk-free returns. In the case of India, the selling is intense this time due to increased valuations of the Indian stock market.

4. Increase in earnings

After disappointing Q1 and Q2 earnings, all eyes are on India Inc’s ongoing Q3 earnings. Experts do not expect a complete improvement. Still, he is hopeful that some areas like IT will see some improvement.

“If the Indian market has to recover, we need positive data on the growth and earnings front. Q3 results may be slightly better, but the recovery in growth will be slow and gradual,” Vijayakumar said.

5. macro picture

The Indian economy has witnessed a slowdown in the last three quarters. from india gross domestic product India’s GDP is expected to grow by 6.4 per cent in the financial year 2024-25, according to an official release by the Ministry of Statistics and Program Implementation (MoSPI) on Tuesday, January 7. This marks a four-year low and decline. Its growth in the financial year 2024-25 is 8.2 percent.

recently, state Bank of India (SBI) revised its forecast for India’s FY20 GDP growth to 6.3 percent, slightly lower than the National Statistical Office (NSO)’s 6.4 percent estimate.

Furthermore, according to a UN reportThe Indian economy is projected to grow by 6.6 percent in 2025.

Experts believe that the slowdown in growth is one of the biggest concerns for the market. Single digit growth is being seen in many sectors. Improvement in urban consumption and increase in government capital expenditure are the major factors determining growth in the Indian economy.

Apart from the above mentioned factors, disappointment union budget 2025Elevated inflation prints and any increase in geopolitical tensions also remain one of the major concerns for investors.

Read all market related news Here

Disclaimer: The above views and recommendations are those of individual analysts, experts and brokerage firms, and not of Mint. We advise investors to consult certified experts before taking any investment decisions.