
Picture Credit: Geralt
The Indian markets had a rough start to the week, with both the Sensex and Nifty dropping to a seven-month low. Each index fell over 1%, while the Indian rupee recorded its steepest slide in two years, reaching almost ₹87 against the US dollar. For investors, 2025 has begun with bearish sentiments, marked by consistent market dips and sluggish performance.
The downturn stems from both domestic and global challenges. Domestically, India’s government recently revised its growth forecast to 6.4% for the current financial year, marking the slowest growth pace in four years. Contributing factors include high inflation, sluggish investments, and an increasing trade deficit, reflecting weak economic performance in late 2024. Additionally, listed companies in India are expected to report double-digit profit declines for the October-December quarter, citing weak consumer demand.
Globally, the strength of the US economy is another factor. Strong jobs data from the US last week has diminished expectations for interest rate cuts by the Federal Reserve, attracting foreign investments away from emerging markets like India. As a result, foreign investors withdrew over $2.5 billion from Indian markets in January alone.
Despite these challenges, there are some positive signs. Retail inflation in India dipped to a four-month low in December, driven by falling food prices. However, the inflation rate still exceeds the Reserve Bank of India’s 4% target, indicating continued pressure on the economy. As domestic and international headwinds persist, the coming months will be a test of resilience for Indian markets.
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