What has increasing US Interest Rates have to do with Indian Share Market falling?

Question

Why does Indian share prices fall if US Interest Rates Increase?

Answer 1

In brief, there has been a lot of investment in Indian stocks by the hedge funds and FIIs. With increase in interest rates in US, these funds find investments in US more attractive and safe, hence they shift their funds to US securities and treasury operations. Thereby, they may tend to sell their investments in Indian share Market to realise money and shift to US. This leads to bulk selling in Indian Market and it falls.

India having invited global investments in its share market is less insulated now due these variations in US and other developed markets. So the impact of change in interest rates get reflected much faster than earlier years, when foreign investments were very low and insignificant.

Answer 2

The Indian stock market was over-valued. When there is a little bit of bad news, over-valued stocks can get pushed over the edge.