Indian Markets Slip into Correction Territory

The US Dollar Index rose sharply, reaching multi-week highs as investors turned to the greenback amid concerns over inflation and geopolitical uncertainties. A stronger dollar typically impacts the Indian rupee, making imports (like crude oil) more expensive while increasing the cost of servicing foreign debt.
  
Rising inflation breaching RBI's comfort level has dashed hopes of near-term rate cuts, unsettling markets. Persistent FII selling, higher US bond yields, and weak corporate earnings have driven overseas investors toward cheaper markets like China. The depreciation of the rupee against the dollar can also affect market sentiment, particularly for companies with significant foreign exchange exposure.
 
This has impacted India’s IPO market, which started the year with record-breaking listings, is facing a slowdown. Despite blockbuster IPOs like Hyundai Motors India (Rs 28,756 crore) and Swiggy (Rs 11,327 crore), subscription figures have dipped in recent months due to global economic uncertainty, rising interest rates, and tighter liquidity. Upcoming IPOs, such as NTPC Green Energy's Rs 10,000 crore listing, aim to revitalize the market, but recent trends suggest a cautious investor sentiment.

 
Experts attribute the decline to aggressive valuations, market volatility, and regulatory reforms by SEBI that have curbed speculative trading. These changes, while improving focus on fundamentals, have reduced retail enthusiasm that previously drove over-subscriptions. Experts say that, investors are now more discerning, prioritizing company fundamentals over hype. This shift has led to mixed results for recent offerings, with some IPOs debuting at discounts or minimal premiums.
 
While some suggest IPO fatigue due to the rapid influx of public offerings, others view the current phase as a market correction rather than a decline. At the same time, other experts say, highlights that high-profile listings have set a high benchmark, making it challenging for smaller IPOs to capture attention. However, experts remain optimistic, anticipating a resurgence in activity driven by better alignment between valuations and investor expectations.
 
Foreign Institutional Investors (FIIs) were net sellers in the Indian equities market during the previous session, reflecting cautious sentiment amid global uncertainties. Meanwhile, Domestic Institutional Investors (DIIs) offset some of the selling pressure by acting as net buyers. The tug-of-war between FII outflows and DII support will likely continue to influence market direction in the short term.

Ms. S Mohini Ratna - Editor VARINDIA