Why does a stronger US dollar game play for Indian stocks?

Copyright © HT Digital Streams Limit all rights reserved. Dipti Sharma 3 min Read 01 Aug 2025, 05:00 IST As the dollar index was stabilized until July 28, EM also moderated. Summary experts believe that a stabilizing dollar index on foreign inflow in emerging markets such as India can weigh, which implies that the FII merchant can moderate as the trend continues. Mumbai: Prolonged periods of a strong US dollar are often associated with underperformance in emerging market stocks. In the month before the end of June, when the US Dollar Index (DXY) fell by 1.85%, the MSCI Emerging Markets Index – which was exposed to global investors to developing emerging market economies – almost 6%. But since the dollar index rose to July 28, EM gains also moderated, with the MSCI EM index rising only 3.04%, according to Bloomberg data. Whether this poses a risk to foreign inflow in EM shares is now someone’s guess. Prolonged periods of a strong US dollar are often associated with underperformance in emerging market shares. In the month before the end of June, when the US Dollar Index (DXY) fell by 1.85%, the MSCI Emerging Markets Index – which was exposed to global investors to developing emerging market economies – almost 6%. But since the dollar index rose to July 28, EM gains also moderated, with the MSCI EM index rising only 3.04%, according to Bloomberg data. Whether this poses a risk to foreign inflow in EM shares is now someone’s guess. EM -inflow rose modestly to $ 967 million in the week ended 25 July of $ 173 million the previous week, but still far below the $ 2.3 billion average seen over the past four weeks, according to Elara Capital’s July 25 report. How does the US dollar affect EM flow? If the dollar weakens, EMS attracts more investor flow. The MSCI EM index jumped by about 17% in 2025 to July 28 against the fall of the DXY’s 9.1% decline. Elara Capital Vice President Sunil Jain said a softer dollar was a big wind wind for inflow into EMS. However, the DXY has stabilized slightly over the past two weeks and even saw a recovery last week, which put the sentiment under pressure, he explained. Foreign investors downloaded the Indian shares worth £ 96,972 between January and July 2025, a sharp turnaround of the net inflow of £ 30.813 crore seen during the previous year. The DXY has picked up momentum over the past three weeks, rose 0.69% in the week ended 7 July, 0.64% in the week ended 18 July, and 1.5% this week ended August 1, reflecting the continued power in the Greenback. Nilesh Shah, managing director, Kotak Mahindra AMC, said: “The backlash in the dollar can act as a drag on EM flow. Are there no other factors to consider? There is Shah explained that EM flow is a function of multiple factors, including currencies. Balance of payments to know money. The investor sentiment reformed and strengthened the case for investments in the US markets. 2025 under the three-year support level of 100 broke, causing an increase in EM inflow. Interference, the US dollar will affect, “he said in a note of August 1st. Even US investment firm JP Morgan highlighted in the 14th of July that the US dollar in the short term, in the short term, could come up a bit,” we believe it will remain under pressure on the second half, Market news, news reports and latest news updates on live mint.