D-Street: Turbulence ahead, but D-St unlikely to retest recent lows

Mumbai: India’s equity markets are in for a rollercoaster ride over the next few weeks as US President Donald Trump’s tariff impositions have rattled the stock markets from East to West. But the Nifty50 is unlikely to retest its recent lows, as relatively lower tariffs and the domestic focus are expected to leave India “less worse-off” than others, said money managers.

The US has implemented a tariff of 26% on most exports from India. After President Trump imposed these tariffs on April 2, the BSE Sensex and the NSE Nifty fell 1.6% and 1.8%, respectively, in two days.

In the US, the S&P 500 index is down 10.5% since the tariff announcements, while the Euro Stoxx 600 has declined 7.5% and Japan and South Korea have dropped 5.4% and 1.6%, respectively. China, Taiwan and Hong Kong markets were shut on Friday.

“We think the scenario of uncertainty will continue for some more time. First of all, we don’t know whether the last of US policy changes has been heard or not. Similarly, we do not know how other countries react to this change,” said Harsha Upadhyaya, chief investment officer – equity at Kotak Mahindra AMC.

Upadhyaya said the markets are going to be volatile for some more time, as long as there are changes taking place in the global scenario. However, the decline may not be sharp for Indian benchmarks.

Ramesh Mantri, chief investment officer at WhiteOak Capital AMC, said the US markets have made it clear that the tariffs are disruptive, and the administration has signalled that these tariffs will now serve as the foundation for negotiations with all countries.”We believe that much of the negative impact has already been priced in, and moving forward, we expect corrective steps to be taken,” he said. “As a Republican, President Trump is unlikely to ignore market dynamics for an extended period, and we anticipate that decisions may come sooner rather than later.”Any comments from the US President have been, and are expected to be, market movers the world over.

“We believe the recent market bottom at 22,000 (Nifty) will likely hold, with potential buying opportunities emerging at lower levels in the Indian markets. Given that 75% of our economy is still driven by domestic factors, India is well-positioned to navigate current uncertainties,” said Manish Sonthalia, chief investment officer, Emkay Investment Managers.

Sonthalia said while short-term pressure may persist, he expects the Nifty index to remain rangebound between 22,000 and 25,000 over the next 10-12 months. Upadhyaya also said India has a relative advantage here.

“The silver lining is probably India will still be relatively less impacted compared to some of the other economies. And we should be able to come out of it much earlier, given that we are a domestic focused economy,” he said.

Mantri said India is comparatively better positioned than many of its peers, although a potential slowdown in the US economy could still have an impact, particularly on the IT sector, which may bear the brunt of this downturn.

IT WORST OFF
The Nifty IT index has declined 7.6% since the announcement of the tariffs. While service exports have been currently excluded, the sector is expected to face a downtrend due to a likely US economic slowdown. “IT would be largely impacted because of the expected slowdown in US growth.

And due to the uncertainty around the tariffs and the subsequent changes that may come, people would probably go soft on their spending in the next few quarters,” said Upadhyaya. However, the valuations have also corrected quite a bit over the last couple of months in the IT sector, and at these valuations, Upadhyaya is not overly negative.

WHAT HAPPENS NOW?
“Domestic earnings growth is unlikely to give any great improvement in terms of the trend that we have seen in the last couple of months. It’s going to be quite subdued. So, earnings are unlikely to give you any trigger for a large positive performance,” said Upadhyaya. Valuations have corrected significantly, at least on the large cap side, he said.