“The 50% tariff imposed on India which has already come into effect will weigh on market sentiments in the near-term. But the market is unlikely to panic since the market will view this high tariffs as a short-term aberration which will be resolved soon. The U.S. treasury secretary Scott Bessant’s comment that “ at the end of the day India and U.S. will come together” indicates the likely outcome. The market will discount this outcome without panicking.
The real challenge before the market is the high valuations and the tepid earnings growth. The strong pillar of support to the market is the aggressive buying by DIIs flush with funds. Any selling by FIIs will be easily neutralised by the aggressive buying by DIIs.
In the near-term, with the export sectors facing headwinds, smart money will be chasing fairly valued domestic consumption themes. Investors can consider moving money from over-valued smallcaps to the safety of fairly valued largecaps with focus on domestic consumption.”
