US dollar, rising yields, and valuation concerns: Key challenges for Indian markets in 2025
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The post-Covid recovery in the market has given excellent returns to investors. In less than five years, Nifty has more than tripled and the broader market has impressively outperformed. Going forward, there are some strong headwinds, particularly external, which might impact the market. There are tailwinds, too, which can prevent a sharp correction in the market and support it from a potential bear onslaught. Strong dollar and rising US bond yields are threats In early 2025, the strongest headwind facing the market is the US macros. The Trump trade has pushed the dollar index up to above 108 in early January. Perhaps, more importantly, the US bond yields have been steadily climbing up and are hovering above 4.5 per cent in early January. The yield differential between US and Indian sovereign bonds has narrowed to 2.7 percent from a high of above 5 percent in 2022. Most developed and emerging market currencies have been steadily depreciat...