Indian Markets First In World To Erase Losses Triggered By Trump Tariffs

The Indian stock market has become the first in the world to successfully erase all the losses triggered by Donald Trump's reciprocal tariff announcement. The stock market in India's financial capital Mumbai rallied today as trading resumed after a long weekend - Monday being a holiday for Ambedkar Jayanti.

The National Stock Exchange or NSE Nifty 50 index surged as much as 2.4 per cent in Mumbai during the trading session today, bringing back the index to the level it was on April 2, when President Trump signed the executive order on tariffs.

According to a Bloomberg report, global investors are touting Indian markets as "relatively safe" amid global volatility over Trump's punitive move on friends and foes alike.

HOW INDIA IS DIFFERENT

Those reciprocal tariffs however, are currently on "pause" for all nations except China - US' primary adversary. A clash between the two largest economies and two of the world's biggest manufacturers are enough for global markets to brace for impact.

With a population of more than 1.4 billion people and large domestic investors, the Indian markets have a much better capacity to withstand a potential global recession, stated the report.

Speaking to Bloomberg, Gary Dugan, CEO of The Global CIO Office said, "We remain overweight India in our portfolios." He went on to explain that Indian markets, which are "supported by good domestic growth and aided by a likely diversification of supply chains away from China, Indian equities are seen as a safer bet over the medium term."

CHINA AT AN ARMS DISTANCE

The Indian markets have kept Chinese investments at bay for long, and any major impact on China has a minimum impact on India, compared to other markets in the world. With the rapidly growing trade war between America and China, Indian markets and India as an investment destination have come under the global spotlight.

India's manufacturing sector has also been rising at a fast pace, and the country is now seen as an alternative manufacturing hub to China. While Beijing has taken the retaliatory route and opted for a trade war with Washington, New Delhi has adopted a much more conciliatory tone. India and the United States are at an advanced stage for a 'win-win' trade deal - a move seen by the rest of the world as a far more adaptive and flexible stand compared to China.

RESURGENCE OF INDIAN MARKETS

India's stock market resurgence follows a slump of nearly 10 per cent in the equity benchmark over the last two quarters. The selloff had peaked after President Trump dropped the tariff 'bomb', but some other factors included a marginal dip in the growth forecast as well as high valuations.

According to Bloomberg, overseas funds have sold more than $16 billion worth of local equities this year on a net basis. This compared to 2022 - the year that saw the maximum withdrawal at $17 billion.

Giving support after Trump's tariff move, the Reserve Bank of India or RBI - India's central bank - has reduced interest rates, and economists believe it may continue to do so to counter-balance any punitive measures. This has also built on investor confidence in the country.

Tanking oil prices in the international market are another reason for positive investor sentiment in India, which is a major crude importing nation.

WHAT THE DATA SHOWS

According to data compiled by Bloomberg, "the Nifty 50 benchmark is currently trading at 18.5 times its 12-month forward earnings estimate, compared to the five-year average of 19.5 times and a multiple of 21 times at its peak in late September."

Another data set compiled by the news agency shows that India is far better insulated from tariffs, accounting for only 2.7 per cent of total US imports, compared to China at 14 per cent and Mexico at 15 per cent.

(Inputs and data by Bloomberg)