The Indian market is under pressure due to global rate cuts, capital outflows, and renewed volatility. Experts foresee continued caution amid uncertain global economic conditions.
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According to a report by the Union Bank of India, domestic markets are currently navigating a volatile phase, influenced by global economic developments and fluctuations in local indicators.
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The report notes that the 10-year government bond yield softened slightly, closing at 6.82 per cent, down from the previous session. Meanwhile, the 5-year bond yield remained steady at 6.76 per cent. These shifts in bond yields reflect cautious investor sentiment amid the ongoing uncertainty in global markets, according to ANI.
In the foreign exchange market, the Indian rupee depreciated significantly, ending the day at Rs 84.3725 against the US dollar, compared to Rs 84.2800 in the previous session. Analysts attribute this decline to capital outflows, with investors moving funds into safer assets abroad, thus adding pressure on the rupee.
The Indian stock market also faced a sharp downturn, falling by over 1 per cent, thereby erasing gains made during the previous rally. This decline was primarily driven by renewed volatility following the results of the recent US presidential election, which has introduced fresh uncertainty into global markets. Experts have noted that these political developments, coupled with upcoming central bank decisions, have contributed to a cautious mood in Indian equities.
In the commodities market, Brent crude prices trended downwards due to lower demand expectations, as mixed global economic signals continue to affect the market. Gold prices, on the other hand, saw a slight increase as investors sought safe-haven assets in light of the rising market uncertainty.
Meanwhile, the Bank of England (BoE) announced a 25 basis-point cut to its key interest rate, bringing it down to 4.75 per cent, as part of its ongoing efforts to control inflation, which has been gradually decreasing. Similarly, the US Federal Reserve announced a similar 25 basis-point rate cut on Thursday, signalling optimism about the economic recovery.
In Asia, the People's Bank of China (PBoC) maintained its supportive stance, with Governor Pan Gongsheng reassuring foreign investors of the bank’s commitment to growth-boosting policies. Pan also pledged to improve communication with financial markets and open China’s financial services sector further to international participants.
According to ANI, German industrial production recorded a 2.5 per cent decline in September, a steeper-than-expected drop, signalling a slowdown in the country's manufacturing sector. In contrast, retail sales in the euro area rose by 0.5 per cent in September compared to August, with a year-on-year growth rate of 2.9 per cent across the Eurozone, reflecting a cautious but positive outlook on consumer spending in the European Union.
On the global front, 2024 is expected to be the warmest year since records began, according to the European Union's Climate Change Service agency. This announcement comes ahead of the UN COP29 climate summit in Azerbaijan, where nations will negotiate increased funding for climate initiatives. However, the recent US election result has led to tempered expectations for the summit's outcomes.
Back in India, BVR Subrahmanyam, CEO of Niti Aayog, spoke about India's potential to join key global trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Subrahmanyam highlighted that these agreements could benefit India's Micro, Small & Medium Enterprises (MSMEs), which currently account for 40 per cent of the country's exports.
According to ANI, while the global economic outlook remains uncertain, India’s domestic market continues to face pressure from global rate cuts and other external factors.
(With inputs from ANI)
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