Fears of a recession in the US are back to haunt investors. Global stocks are tumbling as bond markets in the US are flashing an inverted yield curve, considered harbinger of a looming recession.
While the possibility of a recession in the US is worrisome for the global economy, economists and analysts say Indian stock investors need not worry much. The fear could mean just a surge in rate cut hopes, till further clarity emerges on the health of US economy.
Equities and commodity markets have fallen in the past two trading sessions. Not only stocks, but also emerging market currencies would feel the heat in a scenario of prolonged concerns about a recession. The rupee, which has just seen a change in fortunes, will not be spared either.
“Recessions usually begin six to 18 months after an inversion, and the stock market can continue to rally well after the yield curve starts flashing red. The 3s-10s curve, as it is known, inverted on July 17, 2006, yet the US market continued to rally for nearly 15 months before topping out on October 9, 2007.
The S&P500 index gave 29 per cent return during that period. India investors need not worry about this,” said VK Sharma, Head of PCG & Capital Market Strategy at HDFC Securities