INDIA: Indian Equities Spooked by Asia Tech Stock Sell-Off Ahead of Budget

Weakness in tech stocks dragged Asia equities lower for a third straight day, with the MSCI Asia Pacific Index falling as much as 1.2% and Morgan Stanley strategists recommending investors book profits from the AI boom. That contributed to the softer showing for Indian equities, with the nation’s major benchmarks moderately easing off their record highs. Meanwhile, USD/INR closed near unchanged levels, with Reuters citing sources in reporting that selling by state banks capped gains.

• Bloomberg note that domestic institutional investors turned cautious on Indian equities, pulling a net $500m from local shares last week in what was the biggest withdrawal in more than six months.
• The caution precedes India’s first annual budget of the new coalition government tomorrow (06:30BST/12:00 local time), with investors hoping for a continuation of policy that prioritised capital expenditure. Nevertheless, the budget is also expected to balance further spending with fiscal prudence in order to manage the deficit.
• According to the Ministry of Finance’s Economic Survey report released earlier today, India’s economy will likely expand 6.5-7.0% in the year through March 2025, less than both the 8.2% in the past financial year and the central bank’s projection of 7.2% for the current year. The report cited slower investment growth by the private sector as well as uncertain weather patterns as some of the reasons for caution.