The domestic stock markets are expected to see a relief rally after US President Donald Trump decided to defer the tariffs on all countries, except China, by 90 days. The decision, which came as a surprise on Wednesday, saw Wall Street indices rallying by over 12%, hitting several multi-year highs. The Dow index soared to end nearly 8% higher, while the Nasdaq rose 12.2% — its best day in 24 years. The S&P 500 ended 9.5% higher, posting its best day since 2008.
In line with the global cues, market players expect indices to gain due to the rub-off effect of Trump’s decision and US market gains. Nikhil Rungta, co-CIO of equity at LIC Mutual Fund, said the bounce-back in global equities on April 10 has almost erased the losses incurred since April 2. “With the Indian markets closed today, we expect them to rally tomorrow in line with global peers,” he said.VK Vijayakumar, chief investment strategist, Geojit Investments, agreed. He expects the Indian market to open with a sharp gap up on Friday, and short-covering can take the market higher.
He also added that IT stocks, which were sharply down during this downturn, will bounce back sharply since recession fears have receded for the time being. Also, FPIs might be more enthused to buy India now that the Chinese stocks will face the pressure due to extended tariffs, he said. The Indian market, much like the other global markets, have been under pressure for months. In the last five trading sessions since the US President announced the reciprocal tariffs, the benchmark indices have declined by 3%.
A head at a global brokerage said that while he expects volatility as people would want things to settle down, there is a certain level of comfort due to the delay and hopes that many countries, including India, may be able to avert the high tariffs through trade deals during these 90 days. “The market could trade sideways for some time and no firm movement can be seen unless there is clarity,” he said. Sonam Srivastava, founder of Wright Research, said that the equity market impact in India is likely to be mildly positive in the near term. “Export-oriented sectors may benefit as global trade flows get redirected.
For example, Indian specialty chemicals firms or textile exporters could see improved order flows from Europe and the US, especially as companies diversify supply chains. This could also support sentiment for “China+1” beneficiaries,” she added. However, she also believes that volatility could rise as a second-order effect. If China reacts aggressively — say, by stepping up trade with other emerging markets — it could lead to regional uncertainty.
India’s own export-import basket is heavily influenced by Chinese supply chains, especially in application programming interfaces (APIs), electronics and solar components. So, the country could face indirect shocks if the US-China spat worsens, Srivastava added.Vijayakumar added that investors should not expect a sustained rally in the market. According to him, if the rally to sustain India’s earnings growth has to pick up meaningfully, which will take some time.
Saurabh Mukherjea, founder of Marcellus Investment Managers, said there should be a relief rally now that the gun is off the table, but he advised investors to still be careful as the opportunities are still at long way from here due to a combination of factors like overvalued share prices, a slowing economy, and a tricky global environment.