Indian Markets Brace for Volatile Week Amid US Tariff Confusion
Markets in India are anticipated to experience significant volatility throughout the upcoming week as investors on Dalal Street grapple with persistent uncertainty regarding US tariffs on goods exported to the world's largest economy. The lack of clarity stems from recent legal and political developments in the United States, leaving market participants in a state of flux.
Divergent Views on Tariff Impact
While a majority of market analysts believe that the tariff rates on Indian goods will not deviate substantially from previous levels, a segment of experts argues that the new tariff structure could potentially place India on an equal footing with several competing nations. This scenario, if realized, would represent a more favorable position compared to the period before the US Supreme Court invalidated President Donald Trump's tariffs on Friday evening.
GIFT Nifty's Significant Rally
Following the Supreme Court's decision and Trump's subsequent announcement of a 10% tariff on all goods for 150 days, the GIFT Nifty index witnessed a notable surge late on Friday. The index closed 320 points higher, marking a gain of 1.25% to settle at 25,886 points. Traded on the NSE's GIFT City platform until late hours on all trading days, the GIFT Nifty typically serves as a reliable indicator for the opening of the Indian market the following day, barring any late-night or early-morning developments.
Tariff Changes and Legal Challenges
After the GIFT Nifty closed, President Trump revised the tariff structure on Saturday, increasing the rate to 15%. Adding to the prevailing confusion, Neal Katyal, the US attorney who successfully argued against Trump's tariffs in court, stated that the new tariff rate is also invalid under US laws. This legal contention further complicates the outlook for international trade and market stability.
Reassurance from Fund Managers
In response to investor anxiety, prominent fund managers have offered reassurances. According to Nilesh Shah, Managing Director of Kotak Mahindra Mutual Fund, market expectations are that the US will utilize various legal provisions to maintain tariffs at nearly unchanged levels. "Any alteration in tariffs is likely to be short-term and thus improbable to materially influence market direction," Shah remarked late on Saturday.
Echoing this sentiment, Samir Arora, founder of Singapore-based Helios Capital, which also operates a domestic fund house under the same name, commented on social media platform X that the 15% tariff rate poses no significant issue for India. His perspective suggests a degree of resilience in the face of external economic pressures.
As the situation evolves, market participants will closely monitor further developments in US trade policy and legal proceedings, which are expected to dictate short-term market movements and investor sentiment on Dalal Street.
