ANI
11 Sep 2026, 08:00 GMT+10
New Delhi [India], September 11 (ANI): Rising global bond yields could remain a key headwind for India's monetary policy and may limit the scope for further rate cuts, even as the country's economic growth remains resilient, HSBC Mutual Fund said in its latest market outlook.
The fund house said the direction of India's interest rates would depend not only on domestic economic conditions but also on the global interest-rate environment, particularly the US rate cycle.
"Rising global yields are likely to remain a headwind going forward," HSBC Mutual Fund said, adding that with growth remaining broadly resilient in India, rate hikes will depend on the US rate hike cycle and whether inflationary pressures remain persistent domestically.
The assessment comes as India continues to face a challenging global macroeconomic environment, with higher global yields, geopolitical tensions and a reversal in commodity-price trends creating risks for the economy.
According to HSBC Mutual Fund, India's growth remains resilient despite global challenges, with the investment cycle expected to remain on a medium-term uptrend. Government spending on infrastructure, continued support for manufacturing and a potential recovery in private investment are expected to support economic activity.
However, the fund house believes the global interest-rate environment could make it more difficult for India to pursue an independent monetary easing cycle.
Higher global yields can make overseas investments more attractive and can also put pressure on emerging-market currencies and financial markets.
For India, a sustained rise in global yields could therefore become an important factor for the Reserve Bank of India while assessing the room for monetary easing.
HSBC Mutual Fund also flagged commodity prices as another major risk for the Indian economy. It said benign crude oil and fertiliser prices had been positive for India in 2024 and 2025, supporting inflation, the fiscal deficit and corporate profit margins. However, geopolitical conflicts have now reversed that trend.
"Global commodity prices: Benign global prices of crude oil and fertilisers have been a positive for India from an inflation, fiscal deficit and corporate margins perspective in 2024 and 2025. However, these trends have now reversed due to geopolitical conflict and will be a headwind for India in 2026-27," it said.
A rise in commodity prices could add to inflationary pressures, potentially making it harder for the central bank to ease monetary policy aggressively.
HSBC Mutual Fund also expects private investment to pick up as industrial capacity utilisation remains at reasonably high levels, while continued expansion of the Production Linked Incentive scheme could encourage companies to increase investment in targeted manufacturing sectors.
Potential trade agreements with the European Union and the US are also expected to support Indian manufacturing and encourage private-sector investment over the medium term. (ANI)
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