### Summary
India's retail inflation in July rose to 7.44%, higher than market expectations, and is expected to remain elevated in Q3. The global currency market is experiencing significant turbulence, with the USD appreciating despite economic weaknesses. Heightened inflation and volatility in the currency market pose risks to the Indian market.
### Facts
- India's retail inflation in July was 7.44%, exceeding market expectations.
- Elevated inflation is expected to continue in Q3.
- The global currency market is experiencing turmoil, with the USD appreciating despite economic frailty.
- FII outflows have increased, but India's equity market is performing better than other emerging markets.
- The RBI has revised its inflation forecast upward and expects inflation to decrease to 5.7% in Q3.
- High interest rates and inflation are expected to impact corporate earnings growth and valuation.
- India's one-year forward P/E valuation has decreased from 20x to 18.5x.
- Bond yields have increased, leading to a divestment of equities and acquisition of bonds.
- The domestic market is supported by restrained FII divestment, robust purchasing by DIIs and retail participants, and outperformance compared to other emerging markets.
- Selling in global equities has increased due to concerns of deflation and defaults in China's realty and finance sectors.
- The author expects the selling from FIIs to continue in the short-term due to elevated global bond yields, US credit downgrade, and slowdown in emerging markets, but India will continue to outperform.
- In the last month, the MSCI World index was down 4.2% compared to MSCI India's 1.85% decrease.
China's stock market has experienced a bearish performance recently, with the benchmark stock index reaching a 9-month low, and there are concerns about the longer-term equilibrium interest rate highlighted by Fed Chair Powell's remarks at the upcoming Jackson Hole Economic Symposium.
Asian stocks, particularly Chinese markets, may find some relief after Wall Street's resilience in the face of rising bond yields, though economic data from China remains underwhelming and foreign investors continue to sell Chinese stocks.
Asian markets are expected to follow the global trend of weakness in stocks, a buoyant dollar, elevated bond yields, and souring investor sentiment, with no major catalysts to change the current market condition.
Volatility and rising interest rates have caused a pullback in U.S. equity markets, particularly impacting the technology sector, but investors should not panic as pullbacks are normal in a bull market and present buying opportunities. China's deteriorating economic conditions and weak seasonal trends have also contributed to the selling pressure. However, support is expected to be found in the 4,200 to 4,300 range in the S&P 500, and the Federal Reserve's likely end to the rate-hiking cycle and improved earnings should provide fundamental support for investors to buy the dip.
Asian shares rally as Nvidia's strong performance boosts Wall Street and a decrease in U.S. bond yields eases global borrowing costs.
U.S. equity markets rallied as tech stocks gained and Netflix shares rose on strong subscriber growth, while Foot Locker and oil stocks struggled; U.S. Treasury yields and the dollar fell, while cryptocurrency prices rebounded.
Chinese stocks rally as Beijing takes steps to boost the market.
Most Asian stocks rose slightly as markets awaited key economic readings and a rally in Chinese shares extended amid speculation over more stimulus measures.
Equity markets are higher as investors consider macro data, with Wall Street experiencing a rally fueled by optimism about interest rates and job openings.
Wall Street's rally in stocks is expected to pause as investors await new data on jobs and GDP to determine whether the US economy has been impacted by Federal Reserve tightening.
UBS reports higher than expected profits, job creation in the US slows, and markets rally on weaker economic data and hope for a pause in interest rate hikes. China's factory activity shrinks but at a slower pace, while retail sales increase. There are opportunities for investors in other Asian markets.
Foreign portfolio investment inflows into the Indian markets slowed down in August due to concerns about rate hikes in the US, resulting in higher bond yields and a stronger dollar, but India remains an attractive market for investors compared to other emerging markets.
Asian stock markets rise on the belief that the Federal Reserve has finished raising U.S. interest rates and hopes that policy stimulus from Beijing will stabilize the Chinese economy, while trading remains thin due to a U.S. holiday.
Indian shares advanced on Monday, driven by the metals sector supported by China's measures to boost its property sector and expectations of a U.S. Federal Reserve rate pause, with small-caps and mid-caps outperforming blue-chips on sustained retail inflows.
The stock market rally faced pressure as rising Treasury yields and Apple's China troubles pushed major indexes below their 50-day moving averages.
India's record stock market valuation and increasing foreign inflows are positioning the country as a safe and attractive investment option, especially amidst the economic troubles and struggling financial markets of its neighboring rival, China.
U.S. stock investors are closely watching next week's inflation data, as it could determine the future of the current equity rally, which has been fluctuating recently due to concerns over the Federal Reserve's interest rate hikes and inflationary pressures.
Stock prices in Asia were mostly higher as investors awaited updates on U.S. inflation and China's economic data, while concerns about rising oil prices and possible higher interest rates weighed on markets.
Asian stock markets rose slightly as comments from central banks in China and Japan interrupted the dollar's rally, while investors awaited U.S. inflation data that could impact future Federal Reserve rate hikes.
U.S. and European firms are shifting investment away from China to other developing markets, with India receiving the majority of redirected foreign capital, due to concerns over China's business environment, economic recovery, and politics. However, diversification is unlikely to result in a rapid decline in exposure to China as the markets foreign firms are investing in are still heavily reliant on trade and investment with China.
Asian markets are expected to finish the week strong due to positive movements in the U.S. and Europe, although the release of economic data from China may dampen the mood, as it includes indicators such as house prices, fixed asset investment, and unemployment. The Chinese government is aiming to support the economy, but doubts remain about reaching the 5% GDP growth target and trade relations with the West continue to deteriorate. However, if investors continue with the bullish momentum from Thursday, these concerns may be temporarily set aside.
Asia-Pacific markets rallied after China's August economic data exceeded expectations, with retail sales and industrial production showing stronger growth, although fixed asset investment fell slightly below forecast; meanwhile, the US stock market also ended higher as producer prices increased more than expected.
Risk appetite remains high in the market as Asian markets follow the rally in Wall Street; China's policy support measures, strong business activity data, and positive IPO of Arm contribute to the optimistic market sentiment.
European and Asian stocks rally on hopes of central banks ending rate rises and positive data indicating a potential rebound in China's economy.
Summary: U.S. stocks slumped amid mixed sentiment about the economy, with only the Dow Jones Industrial Average rising for the week, while Asia-Pacific markets mostly fell, and China's venture capital investment dropped by 31.4% compared to 2022 due to its sluggish economy and geopolitical tensions discouraging foreign investors.
A significant outflow of capital from Chinese stocks and bonds is reducing the market's influence in global portfolios and speeding up its decoupling from the rest of the globe, according to a report by the Times of India.
UBS Investment Bank suggests that the stock slump in China is almost over and investors should be more optimistic about the market outlook, as economic fundamentals have improved and technical signals indicate a potential market rebound.
The stock market's strong rally in the first half of 2023 has slowed down, with stocks down more than 5% since August despite strong second-quarter earnings and a strong economy, leaving investors unsure of what to expect in the final months of the year.
Most Asian stocks retreated as markets absorbed the outlook for higher interest rates and concerns over a property market crisis in China, while Japanese shares rose on the back of the Bank of Japan's dovish stance.
Asian markets may be bolstered by Wall Street's performance, but concerns regarding the surging dollar, rising U.S. Treasury yields, and troubles in the Chinese property sector may dampen investor enthusiasm.
Indian banks are becoming increasingly attractive to global investors due to higher credit growth, improved margins, and stable asset quality, with a significant rise in the total market value of foreign institutional investors' holdings in Indian banks. The country's economic growth prospects, solid performance of lenders, and the growth and profitability enabled by digitalization are driving this investor interest.
Investors attempt a risk-on rally as Treasury yields and oil prices stabilize, but concerns over higher interest rates continue to impact sentiment in European and global markets.
Chinese markets and emerging markets have not met expectations for a rally and outperformance over developed markets, causing a decline in stocks and back-to-back currency losses, but there is uncertainty about what the rest of the year holds as investors assess the situation.
Tensions between the West and China are impacting global markets, leading to potential inflation and higher interest rates, while presenting opportunities for emerging nations and tech giants; strategies such as bringing manufacturing home and "friendshoring" are being pursued, with India viewed as a strong competitor to China in manufacturing; the clash between China and the West also has implications for sectors such as semiconductors, luxury goods, and investment in China; investors are divided on how to approach the Chinese market.
India's inclusion in JPMorgan's emerging market bond index signals major changes in the global capital markets, boosting capital inflows by $20-25 billion and improving liquidity for Indian assets and the rupee, ultimately attracting more investment. India's rise in the global economy will have significant consequences, positioning it as a nonaligned player and surpassing China in certain measures, while ongoing disputes with Pakistan and China continue to shape its geopolitical landscape.
The stock market is poised for a relief rally, as several internal indicators have hit oversold extremes after a period of panic selling, according to Fairlead Strategies' Katie Stockton.
The current rally in stocks since October 2022 is one of the weakest bull markets on record, with elevated valuations and monetary tightening measures limiting upside potential, according to Ned Davis Research.
Indian stock markets rebounded, recouping losses from the previous day, as hopes of the Israel-Hamas conflict remaining localized and a positive global market sentiment led to a rise in crude prices and boosted investor sentiment, with the Nifty and Sensex posting significant gains.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/H243JD2ALJLZHAD2Q2BDRUDOKM.jpg)