Trump’s Tariff Delay Calms Markets, S&P 500 Nears Record High, Will Indian Markets Follow Cue?

Trump Tariffs Delay: S&P 500 inched closer to its all-time-high as markets took a breather after Trump's administration announced the reciprocal tariff plan, which included no immediate enforcement measures. While tensions over prospective trade wars continue to exist, any abrupt trigger seems unlikely of now. This pushed investors to adopt a more optimistic outlook, with the dollar index dropping to 107.

On Thursday, the S&P 500 index closed at 6,115.07 level, up by over 60 points or 1.04%. Wall Street's beloved stock, Nvidia also rose by over 3% as investor sentiment rebounded.

As per the recent memo, signed by President Trump, a plan will be outlined for a country-by-country review to assess reciprocal tariffs and trade discrepancies between the US and its trading partners. Trump has also directed special attention to nations that maintain significant trade surpluses and impose high tariffs on US exports.

No Tariffs for Now?

Probably yes, but for a very brief period. As per a Bloomberg report, the plan to assess the impact of reciprocal tariffs and calculate trade imbalances is "a sweeping process that could take weeks or months to complete."

This has provided the markets with the much-needed calm they were hoping for, as any sudden escalations in the trade war due to tariffs now seem unlikely.

However, investors still need to keep a cautious eye on the prospective directives that might indirectly impact the global trade picture as long-term uncertainty continues to linger.

Where does India stand to gain?

India enjoys a trade surplus with the US, which means, the nation might come under increased scrutiny during the review process.

However, the recent meeting between Trump and Prime Minister Modi may help alleviate some of the concerns, this offering a more favorable outlook for investors.

"Early indications from the Modi-Trump talks are positive from the market perspective. The threatened reciprocal tariffs have been delayed leaving room for further negotiations and a possible deal. India’s willingness to buy more oil & gas from the US can help reduce the trade deficit with the US. Even though Trump is unlikely to back down on reciprocal tariffs, India is treated as a friendly country and the bonhomie between the two leaders augurs well for India," said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

A bounce back for Sensex and Nifty?

Benchmark indices, Sensex and Nifty, have remained under pressure since the start of this year, declining by over 3%. From subdued corporate earnings to FII outflow, many factors have pushed the domestic markets on a downward trajectory. However, analysts are seeing some easing in the short-term.

"The oversold market can bounce back in the near-term but a sustained rally is unlikely since the FIIs continue to be in sell mode. Only a decline in the dollar and US bond yields will turn the FIIs into buyers. So watch out for this space," said Vijayakumar.

The ongoing divergence in the market’s preference in favour of largecaps over mid and small caps will continue. Some of the top holdings in small cap mutual funds now are mega caps, he added.