Global Market Turbulence Weighs on Indian Equities

Indian stock markets face headwinds as volatility ripples across global exchanges, creating a challenging environment for Tuesday’s trading session. The confluence of cryptocurrency sector liquidations, surging Treasury yields, and weakening emerging market currencies signals broader risk-off sentiment that’s unlikely to spare domestic indices.

Domestic Pressures Mount

The Reserve Bank of India’s upcoming monetary policy decision looms large over investor sentiment, while trade negotiations with the United States remain shrouded in uncertainty. Meanwhile, the rupee has come under considerable pressure from foreign institutional selling, depreciating 8 paise to 89.53 against the dollar as India’s trade deficit widens.

Monday’s session illustrated the fragile sentiment: both Sensex and Nifty surrendered early momentum to close marginally lower. Foreign portfolio investors turned into net sellers, offloading shares worth Rs 1,171 crore, though domestic institutional investors provided some support by net purchasing Rs 2,559 crore worth of equities. This divergence in flows underscores the handi set of challenges facing the market.

Global Contagion Effect

The immediate backdrop for Indian markets is decidedly negative. U.S. equity markets entered correction territory, with the Dow sliding 0.9 percent, the Nasdaq Composite retreating 0.4 percent, and the S&P 500 dropping 0.5 percent after five consecutive sessions of gains. Weakness in American manufacturing data paradoxically bolstered expectations for a Federal Reserve rate cut, yet failed to support risk appetite.

European bourses reflected similar malaise, with the Stoxx 600 sliding 0.2 percent. Regional indices performed unevenly: Germany’s DAX fell 1 percent, France’s CAC 40 eased 0.3 percent, and the U.K.'s FTSE 100 slipped 0.2 percent, as Eurozone manufacturing contracted in November.

Cross-Asset Challenges

Treasury yields surged following weakness in Japanese and European government bonds, compressing valuations across equity markets. Gold retreated after touching six-week highs, while oil remained relatively stable despite earlier supply chain disruptions. The dollar weakness stemming from soft manufacturing data did little to offset the broader risk-off environment.

Investors should brace for cautious trading as multiple headwinds—spanning monetary policy uncertainty, currency pressures, and global deleveraging—intersect at a critical juncture for Indian equities.