Market focus on inflation, earnings, labour data over US shutdown, India to see capital inflows in long run: Santosh Rao – News Air Insight

The ongoing US government shutdown is adding uncertainty to global trade negotiations, including talks with India, but markets remain largely focused on fundamentals such as inflation, corporate earnings, and labour market data, said Santosh Rao, Head of Research and Partner at Manhattan Venture Partners, in an interview with ET Now.

Rao noted that while the shutdown has stalled several government functions, it is unlikely to derail tariff discussions with India. “Yes, things are going to slow down. If the government is shut down, things come to a standstill. But tariff negotiations with India are still ongoing and something is expected by mid to end of November,” he said.

According to him, markets are less worried about Washington’s political gridlock, which has occurred more than 20 times in the past, and more focused on key economic drivers. “The market is really watching three things – labour markets, corporate earnings, and inflation outlook – and all three seem to be under control,” Rao

explained.

US-India trade talks to take timeAddressing the impact of the shutdown on India, Rao said New Delhi will not rush into any agreement. “India has certain demands and trade negotiators on both sides are aware of that. It’s not going to happen fast, but talks will continue despite the shutdown,” he said.

FII outflows pressure Indian markets

On India’s market outlook, Rao acknowledged that foreign institutional investors (FIIs) have been pulling out funds amid global volatility, making India one of the worst performers in the MSCI Emerging Market Index recently.

“India is still the fastest-growing economy, but right now other markets are offering better risk-reward because of inflation and relative valuations,” Rao said.

However, he remained optimistic about long-term inflows. “Things will settle. India will start getting the money back in, maybe not at the record levels of two-three years ago, but gradually it will return. These flows are cyclical, and India’s growth story remains strong,” he said.Thus, while near-term headwinds such as inflation, trade tariffs, and FII outflows weigh on investor sentiment, experts like Rao believe India’s fundamentals will continue to attract global capital once the current volatility eases.