Markets Slump as Trump’s Victory Honeymoon Ends
The Indian stock market saw a significant dip on Thursday, erasing the gains from the previous day when Donald Trump won the US presidential election. Sectoral indices, particularly metals, pharmaceuticals, and real estate, were hit hard.
Stock MarketFpisTrumpFederal ReserveSectoral IndicesReal EstateNov 07, 2024
Foreign portfolio investors (FPIs) continued to sell off, with a strong dollar under a Trump presidency not boding well for emerging market equities. On Thursday, foreign investors pulled out Rs 4,889 crore worth of shares, while domestic institutional investors (DIIs) infused Rs 1,787 crore into the market. FPIs have now sold shares in India for 25 out of the last 26 trading sessions.
A strong dollar index is generally negative for emerging markets, and according to Angel One Wealth, it's highly unlikely that India will be shielded from this macroeconomic headwind. 'The US economy doing well is likely to be anti-EM,' they noted.
Jitendra Gohil, chief investment strategist at Kotak Alternate Managers, expressed that it's too early to predict how global politics, economics, and financial market performance will evolve under Trump. 'We have been recommending investors to stay invested and rotate their portfolios towards defensive and large-cap stocks,' Gohil advised.
The weakening earnings and economic growth momentum in India, coupled with high valuations, have been key factors behind the FPI sell-off. However, Gohil believes that the sell-off may reach a point of fatigue. As the government increases spending efforts, the economic momentum could pick up in the coming months.
With the uncertainty over the US elections resolved, the focus now shifts to the Federal Reserve’s interest rate announcement, which is expected to dictate market direction. 'Investors are on the sidelines, anticipating a 25 bps rate cut and closely watching chairman Jerome Powell’s remarks for future direction,' said Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services.
All sectoral indices ended in the red on Thursday, with the metals, pharmaceuticals, real estate, and automobile sectors being the worst hit. The broader markets also saw declines, but the losses were relatively smaller. The BSE Smallcap index fell 0.4%, and the BSE Midcap index ended 0.7% down.
Frequently Asked Questions
Why did the Indian stock market fall on Thursday?
The Indian stock market fell on Thursday as the initial excitement over Donald Trump’s victory in the US presidential elections waned, and caution set in ahead of the US Federal Reserve’s policy decision and China’s stimulus package announcement.
What impact is a strong dollar having on emerging markets?
A strong dollar is generally negative for emerging markets, as it makes their exports less competitive and increases the cost of dollar-denominated debt. India, in particular, is unlikely to be shielded from this macroeconomic headwind.
What are the key sectors that were hit the hardest?
The sectors that were hit the hardest included metals, pharmaceuticals, real estate, and automobiles. These sectors saw significant declines as the broader market indices fell.
What are the recommendations for investors in the current market scenario?
Investment strategists recommend staying invested and rotating portfolios towards defensive and large-cap stocks. They also advise keeping a close watch on the Federal Reserve’s interest rate decision and chairman Jerome Powell’s remarks.
What factors are contributing to the FPI sell-off in India?
The FPI sell-off in India is being driven by a combination of factors, including the strong dollar, weakening earnings and economic growth momentum, and high valuations in the Indian market.
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