Nifty, Sensex set to open weak amid Trump’s tariff threat
Asian stocks are reeling under pressure following the US President Donald Trump’s new tariff war. Trump on Saturday imposed 25 per cent tariff on imports from Canada and Mexico and 10 per cent on Chinese goods. Trading at Gift Nifty also indicates a gap-down opening of about 150 points for Nifty. The focus has now shifted to global developments, especially the US actions and counter actions by global major economies, which will be closely watched.
For domestic markets, the focus will also be on the upcoming RBI monetary policy. Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said, “Will the RBI soften its stance and announce any rate cut in this week’s credit policy that would be interesting to watch out for? However, investors need to watch out for global developments, as any uptick in US bond yields and FII selling could dampen sentiment.” PMI data for the manufacturing and services would also be tracked by investors, he added.
Shares in Tokyo and Seoul fell more than 2 per cent in early trade on Monday in response to Trump’s trade tariffs on Canada, Mexico, and China. Taiwan was the worst affected as its benchmark index skid nearly 4 per cent.
Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd, said: Donald Trump reiterated his plans for 25% tariffs on imports from Canada and Mexico and 10% tariff on China, effective from 1st February which is likely to induce near-term volatility in the global markets.
According to Emkay Global, the US imposed tariffs on Canada, Mexico, and China over the weekend. Implications for India: A relative benefit to Indian exports to the US, but this could be negated by China’s reaction (likely price cuts). Another round of DXY appreciation could hurt equities and the currency, making the February 25 rate cut much more difficult.
“We note that the tariff action was far more benign than originally threatened. Further downside risk would come from any direct action on India, but that is not our base case. Exhibit 5 showcases Indian companies’ facilities in Mexico for assessing the impact of tariff imposed.”
The US and India’s manufacturing PMI for January to be released on Monday, which will be the key macro data to watch out for. “Investors will closely study the fine prints of the Budget policies and market focus will shift back to the corporate earnings/outlook and RBI’s interest rate decision to be announced on Friday,” he said.
Apart from these, Trump also threatened to impose new tariffs on the European Union. Though he didn’t specify a timeline, he said, “I wouldn’t say there’s a timeline, but it’s going to be pretty soon.”
Osho Krishnan, Sr. Analyst, Technical & Derivatives of Angel One, said: “Now, the major Union Budget is behind us, and it appeared as a non-event but practically speaking, FIIs participation was very minimal. Hence, the actual reaction is likely to be witnessed on Monday and hence, we need to wait for a day or two to understand whether the market has really discounted the Budget factor or not.”
Additionally, the risk of Donald Trump imposing various tariffs is still looming. Hence, it’s better not to jump to any conclusions at this moment and instead keep a close eye on these developments, he cautioned.
