Why in news
The BSE Sensex closed lower for the sixth consecutive day due to foreign investors pulling out, mixed earnings reports, and concerns over U.S. tariff policies.
Why Is Trump Affecting Markets?
Trump's new tariff directives: 25% tariff on aluminum and restoration of steel tariffs to protect U.S. industries from "unfair trade practices."
Negative impact on Indian markets due to fears of increased competition from dumped Asian steel exports and price reductions. Indian steel companies, like JSW Steel, reported falling returns.
Ongoing investigation into steel imports in India over potential dumping.
Why Is Foreign Money Moving Away?
Foreign institutional investors (FIIs) are shifting funds from Indian markets to U.S. bonds for safer returns, especially with India's modest market performance, inflation, and trade concerns.
The inverse relationship between bond yields and stock markets: As U.S. bond yields rise, foreign investors prefer them over Indian equities.
Domestic uncertainties and inflation contribute to weaker investor sentiment, leading to FII selling and a stronger dollar/weak rupee.
FIIs have sold ₹93,907 crore in the Indian market this year, contributing to market downturns, despite some offset from domestic investors.
What Is the Outlook for the Near-Term?
The tightening of U.S. trade policies, geopolitical tensions, and global economic slowdown could continue to impact markets.
FIIs are expected to return to India once signs of growth and earnings recovery appear, though the timing is uncertain.
SIP inflows could help absorb some of the selling pressure from FIIs, providing stability in the short-term.
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