Vinod Bhat's Market Pulse - Mar 3, 2023
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In Feb, nearly all major financial assets ending in the red amidst growing concerns that central banks will keep interest rates higher for longer.
With the US 10-yr yield breaching 4%, US Dollar was the only major financial asset that has gained.
Global equities saw a reversal of the rally seen in Jan. Increase in bond yields weighed on multiples while upward revisions to policy interest rate expectations – moving deeper into restrictive territory – raised fears of a bigger hit to future earnings from economic weakness.
Chinese stocks experienced the greatest losses among the major global equity indices. Further evidence that the China reopening trade fizzled out came from the correction seen in industrial metals. Meanwhile, gold prices relapsed on the back of higher real interest rates and a stronger US dollar.
In India, Nifty was down 2% in Feb. India's underperformance vs. EMs has driven relative valuations down, closer to the 10-year average. India's weighting in EM funds is a low but still overweight. Despite the market volatility, FPI flows have been stable.