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Business News/ Markets / Stock Markets/  Should Indian stock market investors worry about US shutdown — explained
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Should Indian stock market investors worry about US shutdown — explained

Experts expect short-term impact on US stocks and global bourses, but Indian market to remain least affected due to stock market holiday falling on Monday

US shutdown may disrupt federal government services and impact US stock market, but damage is expected to be limited and markets to recover quickly. (MINT)Premium
US shutdown may disrupt federal government services and impact US stock market, but damage is expected to be limited and markets to recover quickly. (MINT)

US shutdown: Amid buzz of partial US shutdown on 1st October 2023, Indian stock market opened with an upside gap and went on to extend its early morning gains further. However, it witnessed sharp correction in the last hour of Friday session, but it wasn't enough to drag Indian indices in red zone gain. However, stock market experts are of the opinion that in case, US government shutdown happens, especially after the Republican Party's latest stance, US stocks may witness some selling pressure for very short term. 

This may impact other global bourses, but action on Indian bourses would be missing due to Mahatama Gandhi Jayanti falling on 2nd October 2023. Market experts maintained that Indian stock market may react to the US stock market movement for short term but it is expected to remain least affected by the US shutdown.

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What US shutdown means for Americans

Highlighting the impact of US shutdown, Rajesh Sinha, Sr. Research Analyst at Bonanza Portfolio said, "If US lawmakers fail to pass legislation funding the federal government before the end of the fiscal year on September 30, 2023, there will be a Federal Government Shutdown. A shutdown would furlough millions of federal employees, leave the military without pay, disrupt air travel and cut off vital safety net services, and it would be politically punishing to lawmakers whose job it is to fund government."

On why US shutdown is round the corner, Arun Kejriwal, Founder at Kejriwal Research and Investment Services said, "US shutdown is more because of the political reasons than any economical reason. So, markets my react to the US shutdown (if it happens) for very short term."

US government shutdown imminent: Republicans reject own funding bill

On how US shutdown will impact US stock market, Rajesh Sinha of Bonanza Portfolio said, "We believe that the US shutdown won’t cause massive damage to the US stock market, however, some impact can’t be denied. Benchmark S&P 500 index’s average performance during government shutdowns has remained flat. During the most recent government shutdown in 2019, the S&P 500 rose more than 10 per cent. It has been observed that the damage has always been limited and markets have recovered quickly."

US shutdown impact on Dalal Street

On how US shutdown will impact Indian stock market, Rajesh Sinha said, "Eents like US shutdown affect foreign flows by FIIs and FPIs into Indian market, which is an important factor for Indian stock markets."

Stock market holiday

Elaborating upon the level of US shutdown impact on Dalal Street, Arun Kejriwal said, "Final US shutdown news would come on 1st October 2023 and most of its impact will take place on 2nd October 2023 i.e. on Monday. Incidently, on Monday, there is stock market holiday in India. So, when Indian stock market will resume on Tuesday, we will have a cue about the impact of US shutdown in global bourses. So, US shutdown won't have much impact on Indian indices." 

However, Kejwiwal maintained that any sharp correction should not be taken as buying opportunity because such fall may take place due to the continuous FIIs' sell off.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Asit Manohar
Chief Content Producer at Live Mint Digital Team
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Published: 30 Sep 2023, 12:50 PM IST
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