Markets rebound to settle at 1-month high after Trump delays tariff storm

US move to delay tariffs, China's response improve investor sentiment

Benchmark indices rallied on Tuesday along with most Asian peers as investors welcomed a 30-day pause on trade tariffs against Canada and Mexico.

 

The Sensex closed at 78,584, up 1,397 points, or 1.8 per cent. The Nifty ended at 23,739, gaining 378 points, or 1.6 per cent. These gains marked the largest single-day increase for both indices since January 2.

 

Investors were relieved after US President Donald Trump announced a temporary halt to additional tariffs on imports from Mexico and Canada, following both countries' commitment to enhance border enforcement efforts. Previously, Trump had imposed a 25 per cent tariff on imports from Canada and Mexico, and a 10 per cent levy on Chinese goods, stoking fears of a global trade war. China's measured response to the US tariffs also reassured investors, who are hopeful of negotiations. China, however, warned several US companies of potential sanctions, which led to a pullback in European equities.

 

Domestic investors are optimistic that India will avoid Trump's focus, given its relatively smaller exports to the US compared to China.

 

Signs of recovery in India's manufacturing sector further boosted investor sentiment. The Purchasing Managers' Index (PMI) rose to 57.7 in January, up from a 12-month low of 56.4 in December, driven by increased exports and new orders.

 

"There is still a lot of uncertainty surrounding tariffs, which is why the market is volatile. The 30-day pause is seen as a positive development, but fundamentally, little has changed. Recent results have been unremarkable," said U R Bhat, co-founder of Alphaniti Fintech. 

 

Indian equity benchmarks have declined for four consecutive months, driven by concerns over slowing earnings and significant foreign portfolio investor (FPI) selling. This selloff has made many stocks cheaper, with several falling sharply from their recent highs.

 

On Tuesday, FPIs were net buyers to the tune of Rs 809 crore, while domestic institutions sold shares worth Rs 431 crore. FPIs were net buyers since January 2 for the first time. On the other hand, DIIs (domestic institutional investors) were net sellers for the first time since December 16. Excerpts attributed the selling from DIIs mainly to rebalancing in ITC Hotels by passive funds tracking BSE indices.

 

"We still face challenges ahead. Gross domestic product (GDP) and earnings growth will be difficult for a few more quarters, and valuations remain elevated. We should not overstate the latest rally. We have an expensive market with single-digit earnings growth," said Saurabh Mukherjea, founder of Marcellus Investment Managers.

 

HDFC Bank, which rose 2.5%, was the biggest contributor to Sensex gains, followed by Reliance Industries (up 3.3 per cent) and Larsen & Toubro (up 4.8 per cent). The rally in RIL follows Reliance Retail’s tie-up with Chinese fast fashion giant Shein, which will be relaunched in India five years after it was banned by the government. Shares of Tata group firm Trent crashed 6.4 per cent, making it the biggest loser among Nifty components.

 

The Nifty Midcap 100 and Nifty Smallcap 100 rose by 1.6 per cent and 1.1 per cent, respectively. Market breadth was strong, with 2,422 stocks advancing and 1,499 declining. The total market capitalisation of BSE-listed companies rose by Rs 6 trillion, reaching Rs 425 trillion.