Correction Of Overvalued Indian Stocks Only Silver Lining Amid Geopolitical Churns
Indian stock markets dropped due to Middle East tensions and US dockworker strikes, but there’s potential upside for India.
There were many reasons proffered and offered for what could turn overheated stock markets eventually, war figured somewhere but was not on top of the list. Stock markets across the world have turned distinctly nervous now, ranging from Asia and Europe to of course Wall Street. On Thursday, Indian indices were down quite sharply in their worst session in two months, around 2%, more than many other markets.
Elsewhere, oil prices are rising and currencies are under pressure. Gold prices, which usually rise along with war tensions as investors migrate to safer assets, are also falling. But this doesn’t end here. The biggest dockworker strike at major US ports in 50 years stretched into its third day, stopping the unloading of ships. The ports on the West Coast are functioning but ships will have to sail around the Panama Canal to reach there. This obviously adds to the problems already afflicting commodity and merchandise exports and imports as the case may be.
Like before, India is not insulated against global market movements. Oil prices are still around $75 a barrel though it could be worse. But the fact that it is not worse is more worrisome. It reflects the perception that demand for oil in major economies, from the United States to China, is shrinking. This is not good news in the longer term because a global slowdown if it happens is not good news for anyone.
October 7 will be the first anniversary of the terror attack by Ha...
There were many reasons proffered and offered for what could turn overheated stock markets eventually, war figured somewhere but was not on top of the list. Stock markets across the world have turned distinctly nervous now, ranging from Asia and Europe to of course Wall Street. On Thursday, Indian indices were down quite sharply in their worst session in two months, around 2%, more than many other markets.
Elsewhere, oil prices are rising and currencies are under pressure. Gold prices, which usually rise along with war tensions as investors migrate to safer assets, are also falling. But this doesn’t end here. The biggest dockworker strike at major US ports in 50 years stretched into its third day, stopping the unloading of ships. The ports on the West Coast are functioning but ships will have to sail around the Panama Canal to reach there. This obviously adds to the problems already afflicting commodity and merchandise exports and imports as the case may be.
Like before, India is not insulated against global market movements. Oil prices are still around $75 a barrel though it could be worse. But the fact that it is not worse is more worrisome. It reflects the perception that demand for oil in major economies, from the United States to China, is shrinking. This is not good news in the longer term because a global slowdown if it happens is not good news for anyone.
October 7 will be the first anniversary of the terror attack by Hamas against Israel. A year on, hostilities have only increased even as a low intensity war has raged for many months now.
While the world at large, including the financial and oil markets, had to some extent isolated the tensions in this part of the middle east, that may no longer be possible. This will be the case particularly if Israel retaliates against Iran’s latest missile attack. Given Israel’s track record of going for the aggressive and ignoring international pleas, it would be best to brace for the worst.
For India, the only thing going for it is the domestic economy. Strong monsoons will provide much-needed relief to the agriculture economy and boost rural consumption. On the other hand, China is pulling capital away. Reuters reports that stock brokerage Jefferies has increased its weightage of China in its Asia Pacific ex Japan portfolio and reduced its India weightage.
There is one perhaps silver lining to all of this. Indian stock markets by most accounts have been overvalued and needed some correction. That this present correction is coming via external triggers and not internal is perhaps the only good news one can see.
