CNBC's Inside India newsletter: Could India be a hedge for a U.S. recession?

This report is from this week's CNBC's "Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe  here.

A surprise interest rate hike from the Bank of Japan and the Federal Reserve's willingness to put a September rate cut "on the table" put global stock markets on the brink.

Then came a disappointing U.S. employment report that ultimately pushed stocks off their cliff and spoilt the party for investors.

Global stock markets fell the most on Monday in over two years. Japan's Nikkei cratered by more than 12% and the S&P 500 fell 3% — yet India's Nifty 50 only lost 2.7%.

The Indian benchmark (of emerging market stocks) has also started to outperform the S&P 500 year-to-date.

Could these market moves foretell how Indian equities might perform in the future if the U.S. does indeed fall into a recession?

Taking stock of current economic conditions worldwide could partly address that question. While Europe is struggling and China is slowing down, India is booming.

Such a disconnected global economic picture means "it is unlikely that a macroeconomic distress in the U.S. becomes a global event in 2025," Venugopal Garre, head of India research at Bernstein, told clients this week. Bank failures in the U.S. and Europe in 2023 and China's multi-year housing slump provide evidence of the impact of significant shocks being localized rather than allowed to spread worldwide.

Historically, a U.S.-led recession typically leads to fund flows into safe-haven assets, such as U.S. dollars, Treasurys and gold. In contrast, risk assets like stocks and emerging market currencies fall. A depreciating Indian