MUMBAI: The Indian equity market is likely to experience heightened volatility in the coming week as investors assess the impact of recent US trade tariffs. Concerns over a potential full-blown trade war and a slowdown in the global economy—both triggered by the US measures—are expected to keep market participants cautious.
Additionally, investor focus will shift to the Reserve Bank of India’s (RBI) upcoming monetary policy decision, where a 25 basis points (bps) rate cut is widely anticipated. A reduction in key lending rates could provide some relief to markets, but lingering global trade tensions may continue to weigh on sentiment.
Vinod Nair, Head of Research, Geojit Investments said that investors are expected to closely monitor any countermeasures implemented by global trade partners, which could further exacerbate geopolitical and economic uncertainty. This cautious sentiment is reflected in the sustained rally in gold and bond prices, underscoring a pronounced shift toward safe-haven assets.
Nair added that investors' attention is also firmly fixed on the upcoming MPC meeting, with the benchmark interest rate decision expected next week. A favourable outcome could benefit rate-sensitive sectors. In addition, key macroeconomic indicators—namely India’s inflation figures and US jobless claims—will be closely watched, as they are likely to offer critical insights into the underlying economic conditions in both regions.
Meanwhile, market focus is gradually shifting toward the upcoming corporate earnings season. “The initial outlook remains subdued, with the risk of further downward revisions to earnings growth, largely due to tepid demand and continued margin pressures. The IT sector, in particular, is expected to report soft numbers, and investor sentiment will hinge heavily on management commentary,” added Nair.
Indian equity markets plunged sharply last week amid weak global cues, triggered by reciprocal tariffs announced by US President Donald Trump. The move sparked a massive selloff in US markets and the spillover effects were felt across global equity markets, including India.
US equity markets recently suffered a decline of nearly 6%, marking their worst week since 2020. Local benchmark indices- BSE Sensex and NSE Nifty50 - fell about 2.5% each last week.
Manish Jain, Chief Strategy Officer & Director, Mirae Asset Capital Markets said that April is starting with uncertainty and Tariff and retaliation might keep the markets on edge.
“So, it's tough to expect a positive start (for FY26). I don't think it's all factored in. To factor in something you need to be able to quantify - that's the biggest challenge. So, "Uncertainty" is the key factor here. We don't know when and where it will settle,” stated Jain.
Trump on Wednesday declared a universal 10% baseline tariff on US imports, calling it "Liberation Day," with reciprocal tariffs starting at that rate. While most countries would face the baseline levy, 60 nations - including India —would be subject to higher duties, some as steep as 50%. India's exports to the US will now attract a 26% tariff, which Trump described as a "discounted" rate compared to India's 52% average tariff on US goods.
Jain expects the market to give good opportunities to build a long-term portfolio during dips. At the same time, it will also give opportunities to sell on the rise.
“Consensus EPS for FY27 is INR 1,342. lyr fwd PE(x) at around 19.6x gives Nifty value of around 26,400 by Mar-Jun 26. That's around 13-14% upside from current levels. With respect to downside from current levels: - 1SD from 10yr mean comes at around lyr fwd PE(x) of 16.4 gives Nifty value at around 22,000 by Mar-Jun 26. That's around 5-6% downside from current levels. However, during uncertain times because of tariff impositions, EPS downgrade can drag Nifty to below 20,000. So, the risk reward is yet to turn favorable for equities as of now,” stated Jain.