New Delhi: The Indian stock markets commenced trading on a positive note on Friday, shortly after US President Donald Trump declared a 90-day delay in reciprocal tariffs affecting 75 countries, including India, amidst a growing trade conflict with China.
The BSE Sensex surged by 1,061.26 points, opening at 74,941.53, while the NSE Nifty increased by 354.90 points, starting the day at 22,754.05. This significant rise in Indian equities indicated a boost in investor confidence following the temporary alleviation of global trade tensions.
Despite the notable increase in Indian stock indices, other Asian markets experienced a decline.
Asian shares fell on Friday as US stocks relinquished much of their substantial gains from the previous day. Concerns regarding Trump’s trade war initially led to a 5.6% drop in Japan’s Nikkei 225 index, according to AP reports.
By mid-morning in Tokyo, the index had decreased by 4.2%, reaching 33,148.45.
In South Korea, the Kospi index declined by 1.3% to 2,413.16. In China, Hong Kong’s Hang Seng index slipped 0.4% to 20,606.04, while Shanghai’s index fell by 0.2% to 3,218.94.
In light of the downturn in Asian markets, what is driving the rally in Indian stocks? Here are some potential explanations:
Trump’s tariff suspension
On Wednesday, President Trump announced a 90-day suspension of the most burdensome new tariffs for all countries except China.
Avinash Gorakshkar, Head of Research at Profitmart Securities, informed HT’s sister publication Mint that a key aspect of the tariff suspension is the exemption for Indian exports to the US, which stimulated buying activity on Dalal Street during the early trading session.
India’s potential advantage in the US-China trade conflict
President Trump’s tariffs on Chinese imports have now reached at least 145%, significantly higher than levels that many economists believe could severely impact US-China trade.
However, it is anticipated that these elevated tariffs on China may enhance Indian exports to the US.
Vikas Jain, Head of Research at Reliance Securities, informed PTI that while intra-day volatility is likely to continue, a favorable aspect for India is that increased US tariffs on China could enhance Indian exports to the US. Furthermore, any retaliatory measures from China might lead to a reallocation of Foreign Institutional Investors (FIIs) from China to India.
In a related development, the Reserve Bank of India (RBI) reduced the key interest rate by 25 basis points on Wednesday, marking the second consecutive cut aimed at bolstering an economy affected by the reciprocal tariffs imposed by the US.
As a result of this rate reduction, the key policy rate has been lowered to 6 percent, offering relief to borrowers in the housing, automotive, and corporate sectors.
Anshul Jain, Head of Research at Lakshmishree Investment and Securities, stated to Mint that the market perceives the repo rate cut and the RBI’s “accommodative stance” as indicators of no liquidity constraints. Jain further noted that this situation is contributing to the ongoing rally in the stock market.
