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Below the Perspective on Pre Fed Policy by Nachiketa Sawrikar, Fund Manager, Artha Bharat Global Multiplier Fund

Last month, the expectation was that the U.S. Federal Reserve would hold off on cutting interest rates in December and instead move in January. However, once the Fed signaled that a December rate cut was likely, market sentiment unexpectedly turned negative. Investors now face considerable uncertainty about the policy path in 2026, particularly with a new Fed Chair set to take over in May 2026. As a result, the 10-year U.S. Treasury yield rose from 4.00% to 4.20% last month.

The higher interest rate environment and shifting policy expectations have tightened financial conditions, weighed on asset valuations, and increased volatility across rate-sensitive sectors. Expectations were also that the India–U.S. trade deal would have been signed by now, but delays on that front have added to uncertainty. All of this is putting additional pressure on the rupee–dollar exchange rate.

Consequently, we expect FII inflows into India to be negatively affected, which could further weigh on equity valuations and impact debt markets. In contrast, gold prices in India are likely to remain positively supported by these macroeconomic developments. In the long term, India’s higher growth rate will be positive but in the short term, the above factors would be dominant.

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