Dear Policyholder,
The Indian equity market saw a sharp fall and declined 3.1% in the month of January. Sentiment was dampened by (1) escalating geopolitical tensions following US military action in Venezuela, (2) renewed concerns over potential US tariffs and (3) a depreciating rupee. Mid-cap. and small-cap. indices experienced a sharper decline, falling 3.4% and 4.7%. Most of the sectors ended in the red. Realty (-10%), FMCG (-8%) and consumer durables (-8%) lost the most. Global markets ended mixed. South Korea (+24%), Brazil (+13%) and Taiwan (+11%) gained the most, whereas Indian markets were among the worst-performing markets. India-focused funds continue to face sustained redemption pressure. The current phase has extended into a third consecutive week, with $340mn withdrawn in last week of January, following outflows of $360mn and $320mn in the prior two weeks. The pressure remains concentrated in Japan- and Luxembourg-domiciled funds, which have been the primary sources of selling during this period. A major catalyst is the "Yen/JGB Spike." Japan’s 10Y yields have surged to 2.34% (a 27-year high) following PM Sanae Takaichi’s expansionary fiscal plans. This has fuelled a global sell-off in carry-trade positions and weakened Asian peers like the Rupee, as capital repatriates to Japan. Simultaneously, FOMC held rates at 5.50–5.75%, keeping the Dollar dominant and forcing FPIs to pull funds from Indian debt.