- Indian stocks fall due to higher US yields, rising oil prices, and a weaker rupee
- Taiwan and South Korea benefit from the AI boom, boosting their markets
- US bond yields rise, but their relationship with the dollar has grown complex
A friend called me this week and asked me questions on why Indian stock market is falling while other markets are going up. He also complained that even gold and silver, the go-to diversifiers these days, are not impressive. So, what is really happening?
I didn't have a one-line answer, so I did what I usually do and started digging so as to explain to him the reasons.
US yields are higher. Oil prices have risen. The rupee has weakened. Indian stocks are still more expensive than many emerging markets. At the same time, Taiwan and South Korea are benefiting from the AI boom, while commodity exporters are benefiting from higher commodity prices.
India has its own growth story. But investors have choices. They can put their money into markets with lower valuations, markets benefiting from the AI cycle, or countries gaining from higher commodity prices.
Right now, several things are working against Indian equities. I have explained it in detail in Indian Equities Are Falling: These Are The Reasons. It will help you keep sane and guide you amid social media's misinformation.
That brings me to the second topic: the yields and dollars.
US bond yields are rising. Economics tells us that the dollar also rises when the yields rise. But that relationship has become more complicated.
Since the April 2025 "Liberation Day" tariffs, a rise in 10-year yields relative to other countries has sometimes come with a weaker dollar. Why yields are rising matters: is it growth optimism or worry about debt and inflation? US equities are still pulling in money while demand for US government bonds is softening. Which signal should you trust? Find out here: Dollar & Yields May Not Go Together.
Lastly, you must have heard about various car companies entering India.
Earlier, foreign carmakers had a strong reason to build locally. Importing finished cars was expensive, so companies like Hyundai, Honda and Toyota had to assemble locally, build suppliers and gradually increase localisation.
Today's entrants have more options. They can import cars, assemble kits, use existing plants or partner with Indian companies, thanks to changed rules and trade agreements. VinFast, Tesla and BYD are examples of this changing approach.
But this isn't necessarily negative. It tells us something important. Today's India already has the factories, suppliers and ecosystem that automakers need. Companies can enter the market without building everything from scratch.
The concern is what this means for manufacturing depth. These new players are likely to build more in India only if it makes commercial sense as their volumes grow.
So Indian consumers may see many more brands on the roads, with some cars assembled in India and others imported directly. Read more here: New Foreign Car Companies Aren't Localising
India has spent decades becoming more integrated with the world. That integration has brought factories, technology, capital and consumers.
But integration also means choice. Foreign companies have choices about how they enter India. Foreign investors have choices about where they put their money. And India has to compete for both.
This is different from the earlier phase of globalisation, when simply opening the economy and creating a large market could attract companies and capital. Today, everyone is competing for the same things - capital, technology, manufacturing capacity and talent.
The question is no longer just whether India can attract companies and capital. It is how much value they create here, how deeply they invest, and whether India remains relatively attractive when they have plenty of other options.
That's the week.
If you made it this far, I'd love to hear from you.
Which of these stories stayed with you? What stories can you share around these topics?
And more importantly, what should I dig into next?
An everyday object, a policy, a price that suddenly changed, a trend that's growing around... send it my way. Just hit reply. I read everything.
See you next Sunday.
Cheers,
Swapnil Karkare
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article
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