Why can’t Donald Trump’s tariff policy dictate Indian markets for long? EXPLAINED

Falling for the third straight day, benchmark BSE Sensex declined by 96 points to close below the 73,000 mark on Tuesday amid global equity rout on tariff war worries and persistent foreign fund outflows.

The 30-share BSE barometer closed at 72,989.93, down by 96.01 points or 0.13 per cent, as 18 of its components declined and 12 settled with gains. During the day, it dropped 452.4 points or 0.62 per cent to a low of 72,633.54 but recovered some of the losses in the second half.

Extending the losses for the 10th straight session, the 50-share Nifty of NSE fell by 36.65 points or 0.17 per cent to close at 22,082.65. The index opened below the 22,000 level at 21,974.45 but managed to recover some losses later.

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “Uncertainty unleashed by Trump is aggravating in global trade. The 25% tariff on Canada and Mexico and the 20% tariff on China (with the additional 10% imposed now) kicking in the threats are turning into action. The retaliation to these Trump tariffs is yet to be known. Certainly there will be responses.

If Trump tariff policy continues like this and soon starts impacting other countries it will be bad for global trade and the global economy. India will not be spared. So what will be the eventual outcome?

There is one factor that will tame Trump and that is the market reaction. Even mighty Trump cannot influence markets. Tariffs will soon raise inflation in the US and the Fed can turn hawkish. The US stock market, which is now priced to perfection, can suffer a severe correction, even a crash. This outcome, which Trump abhors, can tame him and bring about some sanity and balance in his policies. We don’t know when this will happen.

In the near-term, there are no chances of a rebound in the Indian market even though valuations are fair. Investors should remain cautious and wait to see how the scenario unfolds.”