Sensex rises 1.77%, Nifty ends above 22,800 after US announces 90-day tariff pause

The rally in domestic markets was seen even as Asian and European markets fell amid fears of escalation of trade tensions between the US and China. Among global indices, the Nikkei 225 was down 2.96 per cent, the DAX fell 1.2 per cent, Euro Stoxx 50 slid 0.54 per cent and the KOSPI fell 0.5 per cent.

“Markets defied the bearish world equities sentiment to end sharply higher on the back of strong all-round buying. The Trump government’s decision on not to impose any import tariffs on any nations for another 90-days provided a sigh of relief to investors that fuelled short covering,” said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

On Thursday, the US stocks and oil prices sank amid fears China may once again respond in kind with higher tariffs to match the latest levies imposed by the United States. US hiked China tariffs to 145 per cent amid intensifying trade war. In retaliation to higher tariffs by the US, China, on Friday, announced to levy 125 per cent tariffs on US goods from Saturday.

Intra-day volatility with a negative bias is expected to make a comeback as China hitting back with 125 per cent tariffs on US imports could trigger a sell-off going ahead, said Tapse.

According to Geojit Investments Ltd’s Chief Investment Strategist VK Vijayakumar, 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. In brief, bond vigilantes forced Donald Trump to retreat. The 10-year yield is even now at around 4.46 per cent. The dollar index has fallen to 100.

The Nifty Midcap 100 rose 1.85 per cent and the Nifty Smallcap 100 gained 1.85 per cent. Among the sectoral indices, the Nifty Metal gained 2.93 per cent, the Nifty IT index rose 1.75 per cent and Nifty Oil & Gas was up 2.2 per cent.

The top gainers on Nifty 50 included Hindalco Industries (6.7 per cent), JSW Steel (4.99 per cent), Tata Steel (4.95 per cent), Coal India (4.6 per cent).

“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,” Vijayakumar said.

Investors have to be cautious and should prioritise safety over returns. Safety now is in fairly valued large caps, he said.