Global financial markets are expected to react sharply to Moody’s recent decision to downgrade the United States’ credit rating. The ripple effects could be visible across trading floors, including in India, where many anticipate an inflow of funds pulled out from US markets. This, some hope, could offer a short-term lift to Indian equities.
Moody’s made the announcement after US markets closed on Friday. The downgrade — from a triple-A rating to ‘AA positive’ — was triggered by a rising fiscal deficit, now at 6.4% of GDP, and mounting national debt. The decision is seen as a warning sign, and it has already begun to shake up global assets.
Gold prices jumped as the downgrade dented confidence in the US dollar and treasury bonds. Gold surged by nearly 2.5% over the weekend. While it dropped early on Friday, reaching as low as $3,152 per ounce, it quickly reversed course after the Moody’s news broke, closing at $3,203.70. It later rose to $3,247 in Asian trade before easing slightly to $3,226.
In Kerala, gold prices surged ₹880 on Friday, taking the price of one sovereign to ₹69,760.
Meanwhile, the dollar index climbed to 101.09 on Friday, before dipping to 100.69 in early trade on 19 May. The euro and pound both strengthened, while the Japanese yen appreciated to 145 against the dollar.
After a strong opening, Indian indices failed to hold on to early gains. The Nifty danced between 24,953 and 25,070 throughout the session. By the close, it had dipped 42.30 points (0.17%) to 25,019.80. The Sensex lost 200.15 points (0.24%) to end at 82,330.59, while the Bank Nifty barely budged, slipping 0.70 points to 55,354.90.
Despite headline indices retreating, broader markets fared better. The Midcap 100 gained 529.65 points (0.94%) and the Smallcap 100 climbed 320.45 points (1.86%).
Defence stocks led the gainers’ pack. Cochin Shipyard soared 12.96% to ₹2,047 — a 35% rise in just five days, and a 57% gain over six months. Mazagon Dock Shipbuilders and Garden Reach Shipbuilders also rallied over 10%, while Data Patterns surged 9.75%. Other defence majors like BEL and Bharat Dynamics posted significant gains.
Gift Nifty had ended Friday at 25,089 and opened lower at 25,050 on 19 May, indicating a cautious start for Indian markets.
Analysts suggest that if Nifty manages to hold the 24,800–24,850 support zone, the uptrend might resume. Resistance is likely near 25,060 and 25,125.
US stock markets had ended last week on a high note, fuelled by tech stocks and hopes around renewed US-China trade ties. The Nasdaq rose 7%, S&P 500 gained 5%, and Dow Jones climbed 3% over the week.
On Friday, the Dow jumped 331.99 points (0.78%) to 42,654.74. The S&P 500 added 41.45 points (0.70%) to settle at 5,958.38, and Nasdaq ended 98.78 points higher (0.52%) at 19,211.10.
But futures tell a different story. On 19 May, Dow futures were down 0.60%, S&P futures 0.78%, and Nasdaq futures 1.02%.
Asian markets were in the red on 19 May. Japan’s Nikkei dipped by around 0.5%, and indices in Korea, Hong Kong and Shanghai also began the day on a weaker note.
While gold shot up, industrial metals slipped on Friday. Copper edged 0.04% lower to $9,533.30 per tonne, aluminium dropped 0.70% to $2,471.52, and other metals like tin, zinc and nickel all declined marginally. Lead bucked the trend, rising 0.90%.
Rubber prices fell by 1.71% internationally, down to 172.40 cents per kg. Cocoa, however, surged 3.48% to $10,931.77. Coffee prices declined 2.14%, and palm oil slipped 1.29%.
Expectations of a weaker dollar pushed crude prices higher. Brent crude ended Friday 1.4% up at $65.41 per barrel. On 19 May, Brent was trading at $65.31 and WTI at $62.44.
The Indian rupee ended Friday on a slightly positive note, closing at ₹85.50 against the dollar — up five paise. China’s yuan stayed steady at 7.21 to the dollar.
Cryptocurrencies gained from the fallout of the US credit downgrade. Bitcoin rose to a high of $107,000 before easing back to around $105,300. Ether also climbed, reaching $2,450.
