Repercussions of import tariffs imposed by US President Donald Trump are likely to further jolt Indian stocks, and the Budget can do little to improve sentiments
The positives of the FY26 Union Budget and negatives of the Q3FY25 earnings season may be drowned out in the fallout of the US imposing high tariffs on three major exporters to the US
Illustration: Chaitanya Dinesh Surpur
Markets, already spooked by fears of a tariff war and geo-political tensions, have been jolted further by the new tariffs imposed by US President Donald Trump, effective from February 4. Consequently, investors are dumping Indian stocks and flocking to assets like bonds, with the Union Budget for FY26 doing little to get them out of this bearish mode and buy Indian stocks.
Once touted as the best markets for maximum returns, Indian equities seem to be losing their sheen over the past few months. The Sensex has lost over 10 percent from its life-high of 85,978.25, which it touched on September 27, 2024. The same is true for Nifty. Another 10 percent decline in these benchmark indices will indicate a bear market.
What are the factors that have turned market sentiments so drastically? Well, plenty.
Rich valuations with no real meaningful earnings make equities less attractive. In addition to that are global issues, even as India itself is struggling with economic and consumption slowdown, which the Budget allocations are likely to address but which may not be just enough.
“The positives of the FY26 Union Budget and negatives of the Q3FY25 earnings season may be drowned out in the fallout of the US imposing high tariffs on three major exporters to the US,” says Sanjeev Prasad, managing director and co-head, Kotak Institutional Equities. He is also not ruling out global risk-off sentiment due to a sharp increase in uncertainty in the global economic outlook.