The recent announcement from U.S. President Donald Trump to delay tariffs on all nations except China for 90 days has sparked optimism in domestic stock markets. This surprising move led to a significant surge in Wall Street, where major indices experienced remarkable gains, with the Dow Jones soaring nearly 8%, and the Nasdaq witnessing its best day in 24 years with a 12.2% increase. The S&P 500 also celebrated its most substantial rise since 2008, climbing 9.5%.

Anticipated Market Rally in India

Following the positive momentum in U.S. markets, Indian investors are bracing for a potential rally. With the Indian markets closed on the day of the announcement, analysts predict a strong opening on Friday. Nikhil Rungta, co-CIO of equity at LIC Mutual Fund, noted that the global bounce-back on April 10 has nearly offset losses from earlier in the month. He expressed confidence that Indian markets would mirror this upward trend when they reopen.

• Wall Street Gains:
  • Dow Jones: Up nearly 8%
  • Nasdaq: Up 12.2% (best day in 24 years)
  • S&P 500: Up 9.5% (best day since 2008)

Short-Covering and IT Sector Recovery

VK Vijayakumar, chief investment strategist at Geojit Investments, echoed Rungta’s sentiment, predicting a sharp gap up in Indian markets on Friday. He believes that short-covering could propel the markets further. Notably, stocks in the IT sector, which had suffered during the recent downturn, are expected to rebound as recession fears dissipate.

Furthermore, with Foreign Portfolio Investors (FPIs) potentially more inclined to invest in India, the pressure on Chinese stocks due to extended tariffs may work in favor of Indian markets.

Market Volatility and Future Outlook

While optimism prevails, a strategist at a global brokerage cautioned that volatility is likely to remain as investors await clarity on trade conditions. They highlighted a sense of comfort stemming from the tariff delay, suggesting that countries, including India, might negotiate favorable trade deals in the next 90 days.

Sonam Srivastava, founder of Wright Research, shared a mildly positive outlook for the Indian equity market in the short term, suggesting that sectors focused on exports could benefit from a redirection of global trade flows. She pointed out opportunities for Indian specialty chemicals and textile exporters as companies look to diversify supply chains away from China.

Potential Risks Ahead

Despite the optimistic forecast, Srivastava warned of potential indirect shocks to India’s economy due to its reliance on Chinese supply chains, particularly in sectors like electronics and solar components. If China were to strengthen trade ties with other emerging markets in response to U.S. tariffs, it could introduce regional uncertainties.

Vijayakumar advised caution, indicating that while a relief rally may occur, sustained growth in the Indian market will require time and a solid foundation of earnings growth.

Saurabh Mukherjea, founder of Marcellus Investment Managers, also highlighted the need for vigilance. While he believes a relief rally is on the horizon, he cautioned investors about the long road ahead due to factors such as overvalued shares, a slowing economy, and a complex global landscape.

As the situation unfolds, investors will need to navigate these challenges while keeping an eye on emerging opportunities in the Indian market.