Moneycontrol Pro Panorama| Investor exodus

As investors navigate this climate of uncertainty, the DXY's movements will be closely monitored.

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.

In recent months, global trade has faced a seismic shift following US President Donald Trump's announcement regarding tariffs. This decision has left governments worldwide in a quandary, contemplating whether to challenge Trump's approach or yield to his demands. Meanwhile, investors are expressing their discontent with their feet.

Data reveal a staggering $41.7 billion in net outflows last week from global equity funds, marking the largest weekly withdrawal relative to assets under management in over two and a half years. The bulk of this downturn can be attributed to substantial pullbacks from US equities by prominent foreign funds.

Emerging markets, especially India, have also been affected by the rush to exit. Last week alone, India experienced a sharp exodus of $632 million from global funds—the most significant withdrawal since January 15th. Remarkably, about two-thirds of this amount, or $418 million, are from India-focused funds, highlighting growing investor apprehension.

Reports say that 86 percent of emerging markets (EMs) reported simultaneous foreign fund outflows, totalling around $3.6 billion for the week. Notable withdrawals were recorded in various countries, with significant exits from China ($723 million), Taiwan ($381 million), South Korea ($155 million), and Brazil ($133 million).

Over the past month, India-focused active funds alone have seen cumulative withdrawals reach $362 million, alongside outflows of $456 million from exchange-traded funds (ETFs) tracking Indian equities over the past two weeks.

The impact of these withdrawals has been apparent in market performance. For six consecutive weeks, Indian markets have closed in the negative, the longest streak of losses since the onset of the pandemic. The downturn escalated following Trump's imposition of an additional 25 percent tariff on India, resulting in Indian markets underperforming against nearly all global peers.

While Trump's tariffs serve as a critical factor influencing the Indian market's performance, there are two other pressing concerns at play. The first is the ongoing lacklustre corporate performance and the uncertainty that clouds future visibility.

The second concern revolves around the strengthening US dollar, as indicated by the Dollar Index (DXY), which tracks the value of the dollar against a basket of foreign currencies. A robust dollar diminishes the appeal of foreign investments for US investors, potentially constraining capital inflows to emerging markets.

Since April, the DXY has consistently held below the 100-mark. This led to a surge of global fund inflows into EMs during a period of bearish sentiment on the dollar. However, the DXY is now hovering around 98.183, inching closer to the critical 100 level.

Analysts warn that should it cross this threshold, we may witness a swift unwinding of crowded long positions in EMs, opening the door to further outflows. Historical patterns reveal that the DXY has consistently foretold market peaks, making it a pivotal indicator for foreign funds whose movements significantly influence market trends.

The interplay of Trump's tariff announcements, dismal corporate performance, and the potential impact of a strengthening dollar are collectively shaping the outlook for Indian markets. As investors navigate this climate of uncertainty, the DXY's movements will be closely monitored, given its role as a barometer for future capital flows and market direction.

Investing insights from our research team

Bluestone Jewellery and Lifestyle IPO: Will it shine on the bourses?

Treasury gains propel SBI profit in Q1 FY26

Potholes on the path, but Tata’s long drive is not over

Tata Power: Betting on renewables, execution strength

Sai Life Sciences: Strong start keeps CDMO business in the lead

Cummins India: Execution, diversification, innovation drive earnings resilience

What else are we reading?

Moneycontrol Pro Market Outlook | Critical support shattered, further weakness likely

AU Small Finance Bank’s leap to universal banking: A game-changer indeed, but what’s next?

Trump tariffs — Be firm, but focus on farm

Can Trump broker peace in Ukraine without Zelenskyy's consent?

RBI surveys confirm Indian consumption divide

Chart of the Day: Can you trust the buy-and-hold approach to investing?

The AI driven nuclear energy race is hotting up

Ruchir Sharma: America doesn’t have a monopoly on wealth creation (republished from the FT)

How police investigates terror cases in India, and how delay in trials is getting in the way of justice

India’s Distressed Asset Market: Ready for growth

Unlocking India’s Rare Earth Potential: From policy to production

Quad’s future after the Trump tariff shock

Markets

S Naren sees 90s-style boom-bust risk, says large caps are the only safe harbour

Tech and Startups

Quick service, quicker repairs: 15-minute home services become quick commerce’s next act

Technical Picks: HUDCO, INDIGO, HINDALCO, TITAN

Shishir Asthana
Moneycontrol Pro