The Sensex rallied over 4,200 points in intraday trade on Tuesday triggered by the India-US trade deal. Shankar Sharma, founder, GQuant Investech, tells Puneet Wadhwa in a telephonic interview that he does not hold much hope for the Sensex and the Nifty to give more than fixed deposit returns in the next 12 months. Edited excerpts:
Has the development cleared the hangover for the Indian equity markets?
I have only seen the tweets by Prime Minister Narendra Modi and US President Donald Trump on the deal. More details are yet to emerge. None of them is too specific on the deal contours.
Based on the information available, basically Indian exports will attract 18 per cent duty, which is very good relatively speaking. But we will have to import $500 billion of American goods. If this is annual, our trade numbers themselves are nowhere close to this on an aggregate basis.
Secondly, even if it is divided annually over five years, or $100 billion each year, to export $80 billion annually we will have to import $100 billion a year. If that is the math, then I don't understand how that is necessarily a very good thing.
In this context, there will be fine print available going ahead than what is being communicated. Without knowing any of that based on the face of it, it does not look like it is some grand deal for India.
What will it take for the Indian markets to at least sustain, if not rally from here on?
The markets need more clarity on the contours of the deal to move up from here. We require more clarity and that is a non-negotiable item as far as the market is concerned. The details available till now are too superficial for any sensible or serious analyst to make a lot of sense of. And, as I've just explained the bare math, if this math is true, then it doesn't look good at all.
So, have the markets over-reacted?
The market was looking for some reason to rally, and it has got some reason now in the form of India-US trade deal. Once analysts and investors settle down, they will ask more questions (about the deal). That said, the initial reaction (to the deal) was always going to be a little over the top. Deeper questions will emerge in a couple of days.
How important are corporate earnings growth for this momentum to sustain? Or are better times already baked in?
Yes, it is over to the earnings growth for the markets to sustain the up move. One needs to understand that the trade deal was not the reason for the markets to be bearish all this while. The trade deal was a complete red herring. The trade problem started only last year, especially in the second half of 2025. But the bear market started in 2024. So, how can we blame a reason (trade deal not happening) that occurs 12 months later for an event that happened 12 months before?
Markets have been bearish all this while for lack of earnings growth and lack of nominal gross domestic product (GDP) growth, and not because of the trade-related problems.
Trade-related companies, per se, are not represented that much in our Indian equity markets, especially in the headline indices. Who are the exporters to the US that have a big presence in the Indian (frontline) indices or Indian markets? Hardly any. So, $80 billion of exports in a $4 trillion market-cap country is unlikely to move anything in the stock market.
But won’t the mid- and small-cap companies stand to gain due to this trade deal?
I am not sure. See, those companies are a part of gems & jewellery, leather, handicrafts, etc. sectors. How many such companies does anybody even know exist in the smallcap, midcap, largecap space? I don't know of any. They might be doing something. But even if those companies exist or don't exist, it does not make much difference to the Indian equity market at the index level.
So, to expect that if a trade policy or trade deal happens, which will benefit those beneficiaries who are exporters, and the market will zoom, I don't see the connection.
Does the trade deal development address concerns that markets and investors had after the hike in securities transaction tax (STT) in Budget 2026?
The STT-related sentiment is overdone. STT is impacting the derivatives segment only. Why should the main stock market fall because of that? What does STT on derivatives have anything to do with earnings growth, top line growth, nominal GDP growth, and with fiscal deficit? It has nothing!
We cannot blame a market fall or pin a market fall, or even say the market will be bearish because of an STT hike only in the derivatives segment. Such logic doesn't add up. I think they can't even be called “logic” as far as the market sentiment/fall is concerned.
Where does one invest in these kinds of markets?
There will be pockets of interest in India. Smaller companies have become attractive while larger companies remain unattractive. If investors work hard enough, they will always find investment-worthy stocks. That said, investing will always be tougher in a bear market and easier in a bull market. But yes, one can still find good companies, which is exactly what any smart investor should be doing right now.
What is the return one can expect from the Indian markets in the next 12 months?
I don't expect much headline returns. On a stock-by-stock basis, however, there can be very good returns. But I don't hold out much hope for the Sensex and the Nifty to give you more than fixed deposit returns in the next 12 months’ time, which is like 6 per cent or so. That, too, if the currency remains supportive. If the currency doesn't (in dollar terms) remain supportive, then investors are going to end up with zero returns in the next one year.
One big takeaway from the entire development, Budget plus the trade deal, and how should investors position themselves in this backdrop?
I don't think the Budget has done anything greatly positive for the stock market. And the negative, which is the STT, is actually a real negative. It is more the sentiment-driven negative that will even itself out. Markets react to only earnings and (economic) growth. If those two numbers are where they are, the markets will remain tepid. If the numbers improve, markets will rise. As far as the trade deal is concerned, I don't understand the fine print yet, but based on the broad math, it does not seem to make any sense to me so far.
 "Markets need clarity on trade deal for the rally to sustain: Shankar Sharma")
