India’s Markets Rise on Fed Cut, Trade Hopes and Currency Watch
India’s Markets Rise on Fed Cut, Trade Hopes and Currency Watch
Fed rate cut injects liquidity as trade-deal hopes loom, nudging India's markets to balance earnings growth with currency headwinds.
In a shifting global macro environment, India’s markets are navigating a blend of optimism and caution. A US Federal Reserve rate cut has injected liquidity into the system, with a large push nearing $40 billion that could shape capital flows and market behavior in the months ahead. Investors are watching how a potential trade deal and the broader liquidity backdrop could guide earnings and valuations across Asian markets, with India in focus.
Even as GDP growth remains a supportive backdrop for earnings, currency markets have become the new flashpoint. Widening current-account pressures and sluggish portfolio inflows introduce vulnerabilities, even as fundamentals stay intact. A favourable trade deal could ease some of these pressures by boosting exports and attracting debt and equity inflows, potentially easing the drag from the currency side.
On the earnings front, the trajectory looks cautiously upbeat. Forecasts point to FY26 earnings growth of about 8% to 9%, with FY27 seen lifting to roughly the mid-teens. After nearly five quarters of downgrades, the sector-wide outlook has started to stabilise, with some groups showing early signs of momentum. Earnings revival is expected to be most visible across autos, cement and financials, helped by broad-based demand and improving visibility.
When investors weigh the upside against currency risks and policy headwinds, the trade-off becomes clearer: a trade deal that boosts FDI and exports could relieve some macro pressure and support a broader earnings re-rating. The road ahead may be uneven, but the underpinnings look constructive, with the broad-based growth story sustaining market optimism even as volatility lingers.
Cover image source: Arvind Sanger on how Fed policy could shape India’s market inflows 🔗
