Topic 1: INDIAN EQUITY MARKET SHOWCASES STRONG RESILIENCE TO EXTERNAL SHOCKS

The equity market had convinced itself following the July FOMC meeting that after two consecutive quarters of negative real GDP, the US Fed shall make a "dovish" pivot. However, cracks emerged following the FOMC chairman Jay Powell’s speech at the Jackson Hole symposium, reiterating its stance to raise interest rates until the inflation is under control.

This led to a major sell-off in equity markets across the globe. Indian markets were no exception. Beyond the kneejerk reaction in the equity markets, the long-term risk of capital outflows from emerging economies like India re-surfaces.

However, Indian markets witnessed a steep rebound in the next few days and recovered most of the losses while other major global markets continued to bleed. The resilience shown by the Indian markets reflects robust macroeconomic fundamentals. India is one of the fastest growing economies, while other major economies are heading towards recession or growing at a moderate pace. Another positive for the Indian economy has been softening of commodity prices and easing of supply chain pressures which has led to an easing of imported inflation (CPI for India peaked in April 2022). Also, the foreign exchange reserves of $561 bn provide a cushion against any external shock. All the above fundamentals have reinstated the confidence of investors in the Indian market which is reflected in surging portfolio inflows by foreign institutional investors (FIIs).



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