Even as tensions between President Donald Trump and Federal Reserve Chair Jerome Powell rose, Dalal Street's main indices remained relatively stable. Gold soared to new highs on Monday, the dollar hit a three-year low, and the Dow Jones dropped more than 1,000 points.
Nonetheless, domestic benchmarks remained stable despite a volatile start. At around 10 a.m., the Sensex had risen by more than 200 points, and the Nifty50 was still trading above 24,100.
This calm is attributed by analysts to a developing trend: emerging markets, like India, are making a concerted effort to distance themselves from the so-called "mother market." Why? The risk of US asset classes has increased due to Trump's erratic policy changes, which range from tariff rants to new broadsides at the Fed.
"The perception that Trump's pressure on Powell could threaten the Fed's independence rattled the US market," said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. "Markets despise political interference in monetary policy." He added that these "abnormal times" are causing "abnormal correlations"—and that India may continue to decouple.
Kranthi Bathini, Director, Equity Strategist at WealthMills Securities, added perspective: "The United States is prominent due to its size and market capitalization. We cannot completely ignore it. US markets influence global sentiment, particularly in the short to medium term. There may be days of divergence, such as today, but overall, US equity trends tend to influence others."
Trump reaffirmed his demand for interest rate reductions on Monday, stating that the US economy might slow if monetary easing is not implemented right away. Wall Street was further unsettled by his criticism, which raised questions about political meddling in Fed decision-making.
The impact was swift. The dollar index dropped to 97.92, a level not seen since March 2022. The euro briefly crossed $1.15, and the Swiss franc reached a decade-high against the dollar. Meanwhile, gold, seen as a hedge against turmoil, rose 2.6% to $3,414.91 per ounce, breaking a previous record of $3,424.25.
Investors also rushed into safe-haven assets such as Bitcoin and US Treasuries. Bitcoin rose to $88,384, while the yield on the 10-year US Treasury note increased slightly to 4.346%.
However, Asian equities were less reactive. In India, sentiment was boosted by strong domestic fundamentals and expectations that banking stocks, particularly the Bank Nifty, would remain resilient.
"This period of uncertainty may well witness EMs like India decoupling from the US market," he said. "Investors should focus on fundamentally sound stocks."
The turbulence occurred amid renewed trade tensions. China accused the United States of abusing tariffs and warned other countries against siding with Washington in broader economic agreements. Brent oil prices fell 2.71% to $66.12 per barrel, owing to ongoing demand uncertainty.
While Wall Street braces for more volatility, fueled by Alphabet's earnings and continued White House noise, Dalal Street appears content to stick to its script.
