India, An Oasis Of Safety In Global Turmoil: Anand Rathi

Anand Rathi Report

The recent surprise rate hike of 25 basis points and reduction in quantitative easing by the Bank of Japan have initiated another phase of carry trade unwinding, causing panic in financial markets.

Recent data indicate that cross-border yen borrowing has risen by $742 billion since 2021, showing the ongoing influence of carry trades. India’s share in this trade is small at $20 billion.

Overall, India’s financial sector has become more resilient over the past decade thanks to tighter regulations by the Reserve Bank of India. The country’s substantial forex reserves ($671 billion) and robust macroeconomic performance are likely to shield it from the reversal of yen carry trade.

Furthermore, the drawdown of the Nifty is far lower than that of Nasdaq on account of more than 10% appreciation in the yen over short periods.

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