Continued FPI Outflow from India Expected as US Bond Yields Surge

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, points out that the impact of rising US bond yields on equity markets is notable. Anticipation of a July rate cut by the Federal Reserve is dwindling due to ongoing tightness in the labor market and concerns over inflation sparked by surging crude prices, with Brent crude reaching $89. Despite recent dovish remarks from the Fed chief, the market’s optimism regarding three rate cuts in 2024 has diminished. This trend is expected to weigh on global equity markets, with FPIs likely to continue selling in India.

However, Vijayakumar suggests that buying into market dips remains a successful strategy in India, where domestic investment plays a significant role. Despite fluctuations, the Nifty has shown resilience, boasting a 3% increase from its March lows, signaling a strong market sentiment. Vijayakumar also notes that large-cap stocks offer valuation comfort.

Meanwhile, Deepak Jasani, Head of Retail Research at HDFC Securities, reveals that the National Stock Exchange (NSE) has reduced the lot size for trading derivatives contracts for the Nifty 50 index to 25, along with adjustments for two other indexes in its routine review. Additionally, the World Bank has raised India’s GDP growth projection for FY25 by 20 basis points to 6.6%, albeit more modest compared to the current financial year’s estimated growth of 7.5%. However, the World Bank anticipates growth acceleration in the following years, attributing it to a decade of robust public investment yielding dividends.