Where to invest as markets overcome tariff fears? Analysts weigh in

From Ridham Desai of Morgan Stanley, Wei Li, Global Chief Investment Strategist, BlackRock Inv. Institute and Shridatta Bhandwaldar of Canara Robeco MF, here is the market strategy of leading analysts

Indian stock markets continue to trade firm on Wednesday with the Sensex and the Nifty 50 recovering fully from the April 2 tariff imposition by US President Donald Trump. The surge comes on the back of 90-day pause by the US administration on the imposition of these tariffs.

 

Are the markets completely out of the woods? Is it a good strategy to diversify into international markets? If so, which ones?

 

Is this a 'sell on a rise market', or should investors buy the dips? Which sectors and stocks are a must for your portfolio, and which ones should be avoided?

 

Here's what analysts across leading research houses and brokerages suggest.

 

Ridham Desai, head of India equity research & India equity strategist, Morgan Stanley

 

The market is transitioning from one driven by macro conditions to one where stock-picking is likely to add alpha. We are capitalisation-agnostic following recent developments, cutting back on our preference for small and mid-caps over large caps.

 

While the bias remains to buy domestic sectors with a cyclical bias, both overweight and underweight positions stand reduced. The Reserve Bank of India (RBI) has policy space to act to support domestic growth, whereas external-facing sectors could go through multiple months of uncertainty.  

 

Overall, we are overweight on financials, consumer cyclicals, and industrials. We are underweight on energy, materials, utilities and healthcare.

 

Wei Li, Global Chief Investment Strategist, BlackRock Investment Institute

 

We resume our positive view on US and Japanese stocks. US equities are supported by the artificial intelligence (AI) theme, resilient corporate earnings and a so far solid economy. Japanese stocks are likely to benefit from stronger corporate profits and shareholder-friendly reforms. We recently upped Europe’s stocks to neutral but focus on selective opportunities while looking for more progress on structural challenges.

 

VK Vijayakumar, Chief Investment Strategist, Geojit Investments

 

The market construct appears positive and is indicating calm after the storm; but investors should not jump to the conclusion that stability has returned to the market and it is poised for further up moves. Since the trade war between US and China is heating up after China’s latest decision to halt exports of rare earths and orders for Boeing, more actions, reactions and volatility are on the cards.

 

Bajaj Finance, Bharti Airtel, Indigo Airlines and Eicher Motors are at 52-week highs. HDFC Bank, ICICI Bank and Kotak Bank are resilient while IT stocks are weak. The market is sending the message that domestic consumption themes will be safer than externally-linked segments during this chaotic global environment.

 

Shridatta Bhandwaldar, head equities, Canara Robeco Mutual Fund

 

While the tariff-related risks pose a potential negative growth impulse, over time, capital will increasingly flow into emerging markets (EM), including India, as investors look for better returns outside of the US. 

 

Valuations are in line with historical averages for large-caps, which looks attractive for long-term investors. While broader market valuations remain slightly elevated, a recovery in earnings growth will be the key to unlocking further potential in mid- and small-cap stocks. 

 

In terms of our portfolio positioning, we remain overweight on sectors like large banks, telecom, pharma, and aviation, while being cautious on commodities and energy. 

 

Shrikant Chouhan, head equity research, Kotak Securities

 

The current market environment is bullish; however, due to temporary overbought conditions, we may see some profit booking at higher levels. 

 

For traders, 23400 (Nifty)/76900 (Sensex) and 23600/77600 would act as key resistance zones, while 23200-23100/76400-76100 could serve as crucial support areas. 

 

If the market falls to 23200-23100/76400-76100, the ideal strategy would be to buy stocks with a medium-term view. Buy Nifty between 23100-23200 levels and keep a stop loss below 23000 on a closing basis.