Some years back, I started a series in this column titled ‘Right Now’, which was the title of a popular rock song released over three decades ago by the music group, Van Halen. The lyrics of this song proposed living for the moment and not being afraid of making a change. So, in this fortnight’s column, I propose to take you, my valued readers, on a Giant-Wheel ride …. ‘Right Now’ across our financial markets.
Right now, the dust that seemed to be settling on the just ended financial year has turned into a storm across global markets following the launch of fresh tariffs by the United States of America and its subsequent pause for countries other than China. For the record, the financial year gone by actually ended up accentuating the bull run at the Indian bourses. Does this mean the current financial year will be one marked by even greater volatility? Perhaps so, but as far as I am concerned, even if it does, what matters is how well the Indian government, as also an investor is able to ride the tariff storm.
Right now, one needs to tread cautiously as the tariff situation just like Covid, is unprecedented. In fact, even more so as Covid like situations had been seen and faced sporadically in the past. Clearly, the real target of the tariffs is China, but they have the economic firepower to take on the US in a prolonged tariff war that ebbs and rises like a tide.
Right now, India could be a potential beneficiary of a prolonged trade war between America and China, given that its government has good relations with the American government and is working on striking a bilateral trade deal that will be mutually beneficial. Heightened economic activity with China which will now be more eager to engage with India more actively to gain wider access to its large market, could be a positive fallout as also peace on the borders which could be another big plus.
Right now, there are seasoned market participants doing more than hedging their equity bets with gold. The price of the precious yellow metal continues to surge. And, if the equity markets remain even half as volatile as it has been over the last fortnight, can there be a further uptick in gold prices? Depending on one’s answer to this question, one could either top up the yellow metal or simply sit back and let the growth in value happen on its own sans the deployment of further capital.
Right now, the markets and for that matter, the economy too, is bracing for the tariff upheavals to continue. While the market mood remains nervous and fickle and to a large extent, fuelled by media voices, I prefer to ignore the media fuelled sentiments and instead, to try and insulate my investments to the extent possible.
(Ashok Kumar heads LKW India. The views expressed here are his own)