Will Markets Recover by March End? Top Expert Explains Trade War Impact On Indian Markets

The global trade war is escalating, with the US, China, and Canada imposing tariffs on each other, sparking uncertainty in global markets. As tensions rise, investors are concerned about how this will impact India's economy and stock market. Will Indian markets continue to decline, or is a recovery on the horizon?

 

G Chokkalingam, Founder & MD of Equinomics Research, believes that while India cannot remain completely immune to the global turmoil, the market has overreacted to the trade war. Apart from the tariff war, a major factor behind the market correction has been the bursting of the small and mid-cap stock bubble, which saw valuations skyrocket before correcting sharply. However, historical trends suggest that the US cannot sustain a prolonged trade war for more than 6 to 12 months, as it would negatively impact its own economy. Reports indicate that consumer spending in the US is already slowing down due to rising prices of imported goods, and small businesses—which contribute significantly to manufacturing—are struggling with higher input costs. These factors could force the US to scale back on its aggressive trade stance.

 

G Chokkalingam also highlights an important aspect that could work in India’s favour: falling oil prices. Global economic slowdowns often lead to a decline in crude oil prices, and currently, oil is already down 22% from its recent highs. Given that India imports around $140 billion worth of oil annually, a 20% reduction in oil prices could save the country nearly $28 billion—more than the total value of India's annual pharmaceutical exports. Historically, such declines in oil prices have cushioned India’s economy during periods of global distress, as seen during the dot-com bust, the 2016 deflationary phase, and the COVID-19 crash.

 

For investors, G Chokkalingam emphasises that there is a critical distinction between fundamentally strong stocks and overvalued stocks that were part of the mid-cap and small-cap rally. While some bubble stocks may continue to decline beyond March, high-quality stocks—many of which have already corrected by 20% to 50%—could see a sharp recovery. He remains confident that the Indian market will bottom out by the end of the month, particularly for quality stocks. His optimism is supported by factors such as better-than-expected Q3 GDP growth, strong corporate earnings, record crop output, and double-digit credit growth in the banking sector. Additionally, valuations have moderated, with the trailing P/E ratio of key indices coming down significantly.

 

However, he warns of risks that could challenge this outlook. If the US takes a tougher economic stance against India or if the monsoon season turns out to be weak, market recovery could be delayed. Despite these uncertainties, he remains 100% confident that the market will stabilise by March-end or early April, with quality stocks leading the rebound.

 

So, should investors start buying now, or is there more downside ahead? Watch the full discussion to get expert insights on how to navigate the current market landscape!