Measured optimism returns to markets as Trump hints at softening additional tariffs on India

Indian equities are poised for positive opening on Monday driven by short covering as Donald Trump appeared to have softened his stance on additional tariffs on Indian imports to the US after his meeting with Vladimir Putin on Friday. The expected rationalisation of Goods and Service Tax (GST) rate that is likely to be rolled out by Diwali could also aid sentiment.

But a runaway rally in the market is unlikely on reports that trade talks between India and the US have been postponed, adding fresh uncertainty. "The market has been range bound and could witness a relief rally next week triggered by short covering as there is significant short build up due to tariff uncertainty," said Mahesh Patil, CIO, Aditya Birla Sun Life AMC "The set up indicates an upward bias, and the recent market low is likely to be the bottom of the downtrend."

Patil said that while no deal was made, the meeting is expected to be the first step in the direction of a ceasefire between Ukraine and Russia which is a positive.


"Trump's punitive tariff imposition on India is also expected to be pushed as he is likely to go soft on India's oil purchase from Russia, which is expected to be cheered by the street," he said.

The benchmark indices snapped the longest weekly losing streak in five years (April 2020) and bounced back after six weeks of consecutive declines on Thursday. The Indian stock market remained closed on Friday on account of Independence Day. Both Nifty and Sensex advanced around 1% in the past week.

"The markets are expected to react more to the likelihood of the GST rationalisation rather than the Trump-Putin meeting as it was largely inconsequential for India," said Siddarth Bhamre, Head of Research, Asit C Mehta Intermediates.

Bhamre said that the GST rationalization is sentimentally positive.

Analysts said further upsides will depend on whether the Nifty is able to cross a key hurdle of 24,800 levels where there is sizable build-up of derivative positions.