An escalation in the Middle East conflict has led to a surge in oil prices, impacting net importers like India. The hawkish stance of the U.S. Federal Reserve, maintaining high rates for extended periods, has driven U.S. Treasury yields to multi-year highs, attracting global investors. Consequently, foreign investors have offloaded ₹228.50 billion ($2.74 billion) of Indian stocks in October, marking the largest monthly sell-off since January.
The Federal Reserve is expected to uphold rates after its policy decision on Wednesday, with market watchers keenly awaiting comments from Jerome Powell. Prolonged high rates could further affect IT stocks that are already experiencing reduced spending from their U.S. and European clients, contributing to a 0.6% loss in the IT index.
Marcellus Investment Managers has noted that the Indian market is factoring in these high U.S. rates, with macroeconomic data reinforcing the Fed's hawkish policy. Persistent foreign divestment in Indian shares due to elevated U.S. yields could lead to market consolidation.
Market sentiment is also being influenced by the Bank of Japan's adjustment of its bond yield control policy, a downturn in Asian markets, and a post-earnings rally from SBI Life, which has become Nifty's top gainer.
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