'The Indian Economy Continues To Be Relatively Better Placed Across Key Emerging Market Economies'

Rising bond yields and ‘higher for longer’ commentary by global central banks remains a near-term risk for both global and Indian markets. From an equity market perspective, we saw some corrections in most global indices in the previous month due to the concern of rising rates.

- Mahesh Patil

Mahesh Patil,

CIO, Aditya Birla Sun Life AMC

Are the increasing US’ bond yields posing a substantial concern for both the Indian equity and debt markets? 

However, the Indian markets continued to be resilient with bouts of volatility. We believe the ‘higher for longer’ rate scenario globally will have a rub-off effect in India and rate cuts anticipated in the early part of the next calendar year have now been pushed back to the latter part of the year.

However, valuations are still quite reasonable and not excessive, as for example, one-year forward PE multiple for the Nifty is at the 10-year average. Hence, rising rates may not have a significant impact on valuation multiples. From a debt market perspective, we believe the recent step by the Reserve Bank of India (RBI) to announce OMO sales as a preferred liquidity management instrument will support Indian bond yields and protect rate differentials versus the rest of the world. Also, if we look from a medium-term perspective, favourable growth and inflation dynamics locally as well as bond index inclusion-related news flow are the key positives.

As we near the corporate earnings’ season, what key factors should investors monitor closely?