Sensex jumps 1,100 pts; Nifty off to strong start but Wall Street selloff spoils party

Benchmark stock indices Sensex and Nifty were off to a strong start on Friday, but not as strong as many domestic investors would have hoped for after the Trump administration recently paused reciprocal tariffs by 90 days. The Wall Street selloff overnight, on concerns the fresh US tariffs on China would only escalate trade war between the two largest economies, weighed in on sentiment.  

The BSE Sensex climbed 1,113.44 points, or 1.51 per cent, to 74,960.59. Nifty stood at 22,746.40, up 347.25 points or 1.55 per cent. Asian markets had rallied up to 8 per cent in the previous session, but the domestic market was shut on the occasion of Mahavir Jayanti. 

"The gap up opening in the Nifty this morning is unlikely to sustain beyond a point given the elevated uncertainty in global markets. President Trump’s retreat from the reciprocal tariffs imposed on countries except China, was forced by the US bond market where instead of safe-haven buying in US  treasuries, there was big selling, pushing the 10-year bond yield up to 4.5 per cent," said VK Vijayakumar of Geojit Investments.

In overnight trade, the Dow Jones Industrial Average tumbled 1,014.79 points, or 2.5 per cent, to close at 39,593.66. The S&P500 index and the Nasdaq Composite index were down 3.5 per cent and 4.3 per cent, respectively. Japan and South Korean markets were down up to 3.7 per cent today. Chinese equities were flat.

Vijayakumar said the 10-year yield is now at around 4.46 per cent while the dollar index has fallen to 100. "There is no room for a sustained rally in the market in the present uncertain context. But investors can take relief from the fact that Indian macros are good and we are one of the least impacted countries in this trade war," he said. 

Nomura said its US economics team estimated that the average effective tariff rate now stands at around 24 per cent. 

"We think the pause will clearly bring a reprieve for Asian stocks (bar Hong Kong/China) especially given the market positioning and prevailing bearish sentiment. A U-turn from President Trump was always an upside risk for stocks, in our view," it said.

Emkay Global said the temporary halt in US tariffs is a significant positive development. The brokerage believes there is minimal likelihood of the stringent April 2 tariff proposals being implemented now. It is optimistic about high-beta sectors and anticipates a rebound in smallcap and midcap stocks, which have recently underperformed.

"The stars are now aligning for a strong rally for India. Earnings estimates are bottoming out and we expect the downgrade cycle to arrest. Valuations have also corrected – not only for the aggregate Nifty but also for more granular metrics like the median PE for BSE 500 (down 21% in the last 6M)," Emkay said.