STT hike, US deal, NSE listing: SMC's Aggarwal decodes 2026 market roadmap

The reduction in US tariffs and the interim trade deal framework are set to significantly boost India's export competitiveness, said Subhash C. Aggarwal

Pending listing of NSE could emerge as a major development and further strengthen investor interest, said Subhash C. Aggarwal, chairman & managing director, SMC Global Securities. In an email interview with Sirali Gupta, Aggarwal also shared his views on foreign investors’ comeback, US-India trade, and STT hike impact. Edited excerpts:

How do you assess the impact of evolving US–India tariff dynamics on Indian markets and corporate earnings?

The reduction in US tariffs and the interim trade deal framework are set to significantly boost India’s export competitiveness, placing it in a more favourable position than peers like China, Vietnam, and Indonesia. This shift is expected to drive gradual order inflows across key sectors, including textiles, auto components, and chemicals, while improving earnings visibility for companies with high US exposure.

 

Constructive market sentiment is already evident in reviving FII interest, as global investors react to easing trade tensions. Beyond immediate gains, these agreements—coupled with the India–EU trade deal—solidify India’s role in global supply chains. Over time, this transition is poised to support currency stability, narrow the current account deficit, and stimulate broader growth across manufacturing and equities.

What is your outlook on the small-and-midcap segment? Are current valuations justified?

Despite recent corrections, mid- and small-cap segments still show pockets of froth, trading above their five-year average P/E multiples. In contrast, the Nifty 50 appears more reasonably valued, trading near or below its historical average.

 

However, the earnings outlook for the broader market is strengthening, supported by goods and services tax (GST) rationalisation and progress on trade deals with the US and EU. As these policy tailwinds improve earnings visibility and justify valuations, mid-and-smallcap stocks could become increasingly attractive for medium- to long-term investors.

What could drive sustained FII inflows into India?

FIIs have become selective buyers, focusing on sectors with strong earnings visibility and cyclical recovery potential. Metals and mining have led maximum inflows in January, driven by rising base metal prices and a preference for physical assets, though future flows remain tied to global commodity trends. Capital goods also continue to attract interest due to sustained government capex and robust order books.

 

This selective trend is expected to persist, with banking, financials, FMCG, and automobiles likely to see renewed interest as domestic demand remains resilient. Ultimately, the sustainability of FII inflows will depend on global macros—specifically lower US yields and a weaker dollar—alongside India’s earnings growth, valuation comfort, and ongoing structural reforms.

What is your outlook for precious metals amid recent volatility?

After a sharp 2025 rally where silver outperformed gold, precious metals are now facing volatility and corrections. This shift is driven by profit-taking, a stronger dollar, and a potentially hawkish Fed, which may keep prices range-bound in the near term.

 

With underlying fundamental weakness and speculative build-up, any decline in ETF inflows could trigger further downside. Consequently, gold and silver are unlikely to revisit their 2025 highs soon, prompting investors to adopt a more cautious, wait-and-watch approach.

When do you expect IPO activity to pick up, and what will drive the revival?

After an exceptionally strong year in 2025, mainboard IPO activity has slowed in early 2026 due to market volatility and FII outflows, though SME listings remain robust. This lull is expected to be temporary, as easing volatility and improved secondary market performance typically revive primary issuances.

 

Market sentiment remains supported by liquidity from 2025 repo rate cuts, GST rationalisation, and progress on international trade deals. These factors are expected to keep primary market sentiment positive in 2026, while the pending listing of NSE could emerge as a major development and further strengthen investor interest.

How will the STT hike impact market liquidity and valuations?

The STT hike aims to curb excessive speculation and protect retail investors from sharp losses. While higher transaction costs may temporarily dampen sentiment and reduce liquidity—particularly for high-frequency traders—the move is unlikely to cause a major valuation correction. Since valuations are primarily driven by earnings, interest rates, and liquidity, the hike may ultimately encourage more stable, fundamentally-driven market participation.

Will the STT hike impact client behaviour at SMC?

The impact of the STT hike, effective April 1, 2026, remains to be seen, with behavioral shifts only becoming clear post-implementation. The move will reduce turnover, particularly among high-frequency traders in the equity F&O segment.

 

However, with the Commodity Transaction Tax (CTT) unchanged and no revision in STT for cash equities, investors may gradually shift toward commodity derivatives and delivery-based trades. Overall, this may lead to changes in trading strategies, but it is unlikely to materially impact broader market activity and may instead encourage more balanced participation.

What is an important lesson you learned from previous market cycles?

Previous cycles show that liquidity-driven rallies eventually return to earnings-driven fundamentals. With India’s valuations elevated, sustained earnings visibility is now essential to justify premiums and attract foreign inflows.

 

Market optimism in smallcaps, IPOs, and leveraged trading often leads to corrections, highlighting the need to prioritise strong balance sheets and sensible valuations over short-term trends. In the present market landscape, investors should remain selective, avoiding overheated sectors and recognising that corrections are a healthy part of the cycle rather than a sign of economic weakness. Ultimately, while technicals drive short-term swings, fundamentals prevail.