Dear Reader,
The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of. The year 2025 so far has been unsettling, to say the least. Donald Trump is upending the global trade order. Conflicts in Europe and the Middle-East have intensified. India and Pakistan too fought for a brief period. Exports and the global economy are slowing. Corporate earnings are muted. The US, the world’s largest economy, is facing an unsustainable debt burden and internal unrest due to deportation of illegal immigrants.
Yet, these risks seem on the periphery of investors. The benchmark Nifty 50 index is higher than it was at the beginning of the year. The index is down just 1 percent in the last five trading sessions, a period when Israel-Iran hostilities have risen.
One reason may be relative resilience. Economic data and events over the last several months show that India is holding up rather well in a troubled world. Interest rate cuts and liquidity infusion measures by the Reserve Bank of India are expected to support the domestic economy. India's dependence on exports is lower than other major Asian economies. Iran is yet to close the Strait of Hormuz, an important trading route for India. For now, analysts are not seeing a major flare-up in crude oil prices due to the current conflict.
“Our central point — that the oil market should remain calm if the conflict stays within the borders of Iran and Israel — still holds,” writes authors of this FT piece, exclusive to read for Moneycontrol Pro subscribers.
Israel and Iran may be fighting bitter aerial battles. However, battles over long distances are expensive and drain resources and ammunition fast, argues another FT piece. This can make it difficult for the countries to sustain a protracted battle. Note than Israel and Iran do not have a common border.
That said, risks to the stock markets exist. Vijay Bhambwani argues that markets this time around face a key risk from highly leveraged retail traders. “That is what keeps me awake at night,” Bhambwani adds.
Meanwhile, inflows into domestic equity mutual funds, which have fuelled gains in the Indian stock markets in recent years, are moderating. Inflows declined significantly from December 2024 levels. Cash levels dropped in May. Amid moderating inflows and cash levels, it has to be seen how long institutional investors will continue purchasing local stocks.
With valuations not looking cheap, a prolonged global economic slowdown and muted earnings can weigh on equity market returns in the near term. Some market observers fear global economic indices will reflect the impact of trade disruptions in the second half of the 2025 calendar year.
The US Federal Reserve meeting this week gains prominence against this backdrop. While expectations on the rate cut front are low, markets will closely track the Federal Reserve’s assessment of the US economy and the path of future interest rates, writes Prateek Chaturvedi. “All the inventories that have been pulled forward by importers, by consumers, by businesses to steady and ready themselves for the tariffs may be impacting the inflation data right now,” writes Chaturvedi.
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R Sree Ram
Moneycontrol Pro
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