AFTER the rapid highs experienced by the Indian indices in the past weeks, the equity benchmark has hit a speed-breaker under tremendous selling pressure. The primary reason behind the fall and the volatile swings in the Sensex and Nifty50 was the US Federal Reserve’s decision to hold interest rates at 5.25 per cent but with hawkish commentary and warning of a continued fight with inflation. The forecast of inflation and the indication of a further rate hike “higher for longer” by US Fed Chair Mr. Jerome Powell has cracked the rising trend in the indices and created a panic attack among retailers in the Asian markets. India, too, has buckled under the pressure of the US Fed decision with four straight sessions of volatility. The break in momentum has called for a bigger question for all stakeholders to answer -- the policy-makers, corporates, industry, and retailers -- when will India move away from global trends and carve its own mark with a robust market? The US Fed did rock the boat in the Indian markets and though it is being termed as a good correction for the future journey, there needs to be a solution to absorb knee-jerk reactions from investors. An emerging market like India must find its own solutions to insulate itself from other factors. Though it is not possible to totally cancel the outside impacts, one development in the current market has certainly shown promise to actually put in place such an ecosystem.

 

Amid the current fall that wiped out investor wealth by a huge chunk, an interesting move has been recorded by the midcaps and smallcaps. The indices are seen as the most vulnerable in a global market fall with an inherent ability of taking a tumble at the first hint of a negative development. However, this time the mid and smallcaps are holding up with a remarkable poise, in a way proving that the recent quick move of 30-35 per cent in the last six months was not a fluke. This sentiment needs to form the future response of Indian markets as the country needs them to stand up to global headwinds to fulfill its dream of becoming the third largest economy soon. The commentary by global agencies for Indian markets is totally bullish as they have hailed the growth of the economy despite weak global cues. As per the World Bank, India will be the fastest-growing economy in FY24 with a 6.3% growth rate. India’s GDP also beat expectations by analysts in the first quarter by accelerating to 7.8% year-on-year.

 

The International Monetary Fund (IMF), too, is betting on the Indian economy to hold up against disruptions likely to be caused by the unending Russia-Ukraine conflict, rising threat of global inflation, dreary pace of growth in top economies like the United States and China, and erratic climate pattern. This belief stems from the resolute response by the Indian markets and India Inc. while coming out of the pandemic blues. India was the first country to emerge out of the dark shadows from the forced lockdown as the Centre introduced timely packages for the industry to keep breathing. More positives are in store in the election year as the government has plans to pump in at least 60 per cent of capital expenditure. With such an overall positive picture of the economy, the markets, too, need to complement the growth story by staying strong despite headwinds caused by inflation and rate hikes by central banks. The US Fed decision does cast a shadow in India as it affects the inflow of funds. However, it can always be countered by a robust mechanism developed at home. The Domestic Institutional Investors (DIIs) must rise to the occasion and stem the rot by adopting a more bold approach. It is time for a few risks by the Indian market if it wishes to match the ‘Vishwaguru’ status.