Market Confidence Remains Haunted By Impact Of US Tariffs On India Inc.

A fortnight back, the Indian equity markets had recovered, albeit for a brief while. And then ironically again the journey along the downward trajectory continued throughout the last week. The Nifty 50 and Sensex declined by approximately 0.7 per cent, closing at 22,397 and 73,828, respectively. Investor sentiment was weighed down by escalating trade tensions, which all posed a risk to global economic recovery. Meanwhile, concerns over persistent FII outflows and the potential repercussions of US tariffs on India Inc. deeply dampened market confidence, and thereby raising uncertainty over Q4 earnings. The broader market also exhibited weakness, with small-cap and mid-cap indices tumbling nearly four per cent and two per cent, respectively. Sector-wise, the IT index led the decline, followed by banking and new-age sectors. Meanwhile, consumer confidence continued to erode amid rising inflation and economic uncertainty. The Consumer Sentiment Index dropped to 57.9 in mid-March from 64.7 in February, reflecting a 27 per cent year-over-year decline and its lowest level since 2022.

On the institutional front, FIIs recorded net outflows of Rs. 5,729 crore in the cash segment, while DIIs infused Rs. 5,499 crore, providing a semblance of stability to the market.

Market analysts feel that the upcoming week is set to be dynamic for global and Indian markets, driven by key macroeconomic data releases. Analysts are of the view that market sentiment will be shaped by US Fed interest rate decision, Indian WPI inflation, US core retail sales (MoM) (Feb), US initial jobless claims, and UK unemployment rate (Jan), among other such factors. Meanwhile, Nifty closed negative last week and was trading above its 100-week EMA, which is near 22,000, and below the 21-day EMA. This clearly suggests a "sell on rise" market sentiment. All these will have to be seen in light of the fact that the recent sell-off on Wall Street had affected global equity markets as the fallout and threat of potential trade wars take hold. It does not require any rocket science to understand that markets do not like uncertainty and when there are dangers and unknowns surrounding market conditions, we often see a move to safer, less risky assets.

Asian equities, including that of India, are not immune to this as we have seen weakness across indices such as the ASX with its strong links to Chinese trade, and concerns over how any trade wars could affect Chinese demand. Whilst trade wars and tariffs will no doubt impact global economies, it is in no one's interest to see an escalation of the trade war, and there is no doubt whatsoever that there will be attempts to ease tensions and mitigate the impact of any potential trade wars. One has to keep in mind that these escalations can have an immediate and sharp impact on the markets. Given the way the current US administration normally communicates, this can happen unexpectedly and at any moment, so it is important to always be aware and remain dynamic with strategies. It is like insuring against any possible exigencies.