Some Short Covering Likely, But Tariff Flip-Flop to Weigh
Market Update Amid US-Iran Tensions and Tariff Changes
Mumbai: With measured optimism, Indian equities approach Monday following a landmark US Supreme Court ruling that deemed President Donald Trump’s tariffs illegal. This decision has sparked a fresh dialogue on trade dynamics.
– Trump initially imposed a 10% tariff, which was later increased to 15% on all countries.
– The new rates are lower than those negotiated earlier this month, but the ongoing uncertainties surrounding tariffs, compounded by escalating US-Iran tensions, are likely to temper any market enthusiasm.
Insight from Industry Experts
“The framework established between India and the US earlier this month was somewhat neutral, but now with the tariffs in question, the outlook is more ambiguous,” commented A Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC.
– He added, “We might see some short covering, but substantial gains are unrealistic, likely capping the upturn to around 1%.”
Last week, the Sensex and Nifty fluctuated, each gaining as much as 0.4% during volatile trading, driven by rising Brent crude prices, which remained above the $71 mark amid fears of a potential US military action against Iran. Historically, the market has been unstable throughout February, even after the US and India finalized a trade agreement that reduced tariffs from 50% to 18%.
– While the current tariff rate stands at 15%, it does not guarantee an immediate market rally.
Expected Market Behavior and Investor Sentiment
Balasubramanian further stated, “The reduced tariffs from 18% to 15% will probably be neutral for the equity market. It’s uncertain if the expected India-US trade deal will undergo renegotiation.”
– Sunny Agrawal, head of Fundamental Research at SBI Securities, echoed similar sentiments, saying, “Investors should brace for significant volatility due to ongoing fluctuations in policy and their macroeconomic impacts.”
He elaborated that while initial reactions may prompt a trading surge, the market is expected to stabilize as investors focus on earnings reports and currency movements for direction.
– “In terms of valuations, the market appears neither excessively high nor low. However, a lack of market enthusiasm persists due to subdued nominal GDP figures attributed to low inflation, as investors are holding out for an earnings upgrade,” he remarked.
Conclusion: Navigating Tariff Uncertainty
As traders prepare for Monday’s session, the specter of tariff changes looms large. The recent developments underscore a cautious approach, with market analysts anticipating short covering but advising against expecting dramatic surges in stock prices.
With ongoing US-Iran relations and tariff ambiguities, it is critical for investors to stay vigilant. Keeping an eye on earnings and currency indicators will be essential for navigating this uncertain landscape effectively.