Stock market indices Sensex and Nifty extended declines in the afternoon trade as fading optimism over US-China trade negotiations, weekly futures & options (F&O) expiry and rising geopolitical tensions prompted increased market caution. A recent rise in crude oil prices, foreign outflows and concerns over promoter and PE stake sales also hurt the market sentiment. Marketmen, however, are optimistic on domestic equities.
By 2 pm, the BSE Sensex was trading 810.01 points, or 0.98 per cent, lower at 81,705.13. Nifty was quoting at 24,884.90, down 256.50 points or 1.02 per cent.
“The 90-day tariff truce agreed upon by the US and China in Geneva may limit the scope for a further significant escalation of retaliatory tariffs. However, the geopolitical rivalry between the two superpowers and the Trump administration’s resolve to curb China’s ascendancy might persist, and we see a shift from traditional trade disputes to strategic rivalries,” Nomura said.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments said there are reports of a possible agreement between the US and China. “But the Chinese haven’t officially confirmed anything. President Trump’s credibility being what it is, it would be too early to discount this as positive for markets. Also President Trump has declared that he will be sending letters to trade partners in the next two weeks setting universal tariffs. Market participants will be waiting and watching for clarity on this. The tariff crisis is not yet over,” he said.
Three Tata group stocks led the Sensex fall. Tata Motors declined 3.01 per cent to Rs 714.10 and was the worst index performer. It was followed by Tata Steel and Titan Company which fell 2.72 per cent and 2.03 per cent, respectively. L&T fell over 2 per cent to Rs 3,601.70. Nestle India, Mahindra & Mahindra and Hindustan Unilever declined up to 2 per cent, Eternal, Axis Bank and SBI also slipped over 1 per cent each.
“While we expect tariff related uncertainties to continue, we reckon India is well placed in the situation given its lower reliance on good exports vis-à-vis competing countries and possibly gain in the event of shifting of supply chain from China in the longer term,” said Vinay Paharia, CIO, PGIM India Mutual Fund.
Pahadia said the market has rebounded notably over the last two months, completely reversing its year-to-date decline and that there is some signs of exuberance in certain segments of the market.
“We reckon it is pertinent to stick to growth and quality mantra of investing while not overpaying for the same,” he said.
Franklin Templeton India MF said two key variables will be crucial to monitor: the sustainability of FI inflows and the pace of equity supply through stake sales and IPOs.
“A favorable balance between these two will be essential to maintain market stability and support valuations,” said Franklin Templeton India MF.
In a note, Morgan Stanley said India has suffered from two quarters of a self-inflicted economic slowdown and corporate earnings downgrade cycle, all driven by a combination of tight domestic fiscal and monetary policy. As growth risk has risen due to US trade policy uncertainty, and inflation has moderated to a multi-year low, the Reserve Bank of India (RBI) has shifted to an accommodative policy stance by cutting interest rates, it said.
“Based on recent data, encouraging signs of the domestic cycle bottoming have emerged. While US tariffs remain a risk, India is relatively insulated given their low goods export exposure to the US and a largely domestic-oriented economy,” Morgan Stanley said.
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