Us fed rate cut: The US Federal Reserve is expected to improve the emerging market sentiments with the first cut in the interest rate in 2025. But India is still looking behind in this matter, as foreign investors remain alert about expensive valuation and slow earning growth. Even after the first interest rate deduction of 25 basis points made by the Federal Reserve in September in the year, there is no immediate increase in the purchase of foreign investors in India.
This step of the fed is a sign of the onset of softening cycle in policies. Usually, policies improve the sentiments of softening markets. But analysts believe that due to expensive valuation, global investors can move to other markets instead of India. Due to which, India does not see any benefit from the rate deduction in America.
Market expert Ajay Bagga says that foreign investors are showing less interest in our markets due to India’s expensive valuation and single digit weak earning growth. He further stated that due to strong earning growth and enthusiasm of investors towards technical and ortificial intelligence, foreign investors are more interested in the market of South Korea and China. Especially if the trade tariff is relaxed, then the interest rate cut by the fed may start changing the content by the end of the year.
Market expert Ambareesh Baliga Bazar Mid term is more optimistic about outlook. He said, “Foreign institutional investors (FIIS) cannot ignore India for a long time. India’s GDP growth rate is 6.5 percent, while in the US it is 3.3 percent and 4 percent in China.” He further said, “Once the uncertainty of the tariff goes away and the business talks go ahead, the foreign investment should start again.”
Display figures clarify this difference. MSCI Emerging Market Undex has climbed 25 per cent in 2025. In this, MSCI China rose by 35 per cent, while India has gained only 5 per cent. Foreign investment is also showing the same trend. China, Japan and Taiwan have the highest number of FII investment. Whereas this year there has been an FII withdrawal of $ 15.4 billion from India. By the end of July, 71 per cent of the large emerging market funds were underweight on India, while 60 per cent of the funds were underweight a month ago.
India is also lagging behind in the balance of other emerging markets on the front of the earnings. Alara Capital analysts reported that in terms of dollars, the growth rate of Nifty EPS was just 4 per cent on an annual basis, leading to India to a lower level at the middle level at the global level. In comparison, 45 percent EPS growth has been recorded in South Korea and 20 percent in Taiwan.
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