A cocktail of worldwide and home headwinds is driving the market panic—Donald Trump’s tariff threats, a roaring Hold Seng rally luring FIIs to China, and underwhelming Q3 earnings at house. As uncertainty grips the market, one query looms massive: Is the worst behind us, or is there extra ache forward?
Based on Dr. V Okay Vijayakumar, Chief Funding Strategist at Geojit Monetary Companies, Trump’s aggressive tariff rhetoric is unsettling traders. “The market is negatively responding to potential tariff targets like autos and prescription drugs whereas shifting focus to home consumption performs which might be shielded from commerce tensions. Nonetheless, Trump’s technique has all the time been to threaten first and negotiate later. The true influence of tariffs is but to play out totally,” he famous.
Extra tariffs would stoke inflation within the US, triggering hawkish feedback from the Federal Reserve—one thing that might, in flip, weigh on the US inventory market. Given Trump’s historical past, Vijayakumar believes the present turmoil might be short-lived, however FIIs are more likely to stay cautious within the close to time period.
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The FII Exodus: China’s Achieve, India’s Ache?
One of many greatest drivers of the latest selloff is the flight of overseas funds. The renewed curiosity in Chinese language equities—lots of which have been buying and selling at rock-bottom valuations—has diverted world capital away from India. “FII promoting will proceed to place strain on largecaps,” says Vijayakumar.
Hong Kong’s Hold Seng surged 3.5% at present, marking its sixth consecutive week of features, the longest successful streak since Might 2020. The rally has been fueled by a surge in Chinese language tech shares, pushed by the launch of DeepSeek, a low-cost Chinese language synthetic intelligence mannequin. The event has reignited world investor curiosity in China, prompting a rotation of funds into the sector, which continues to commerce at comparatively low cost valuations.
Alibaba soared 12.7% to its highest degree since late 2021 after the Chinese language e-commerce big reported better-than-expected income and introduced plans to extend investments in e-commerce and AI.
Extra hassle in smallcap shares?
Gaurav Dua of Mirae Asset Sharekhan believes that whereas a technical rebound is probably going, it ought to be used as an exit alternative for weaker shares. “Valuations in largecaps stay comfy, however the risk-reward in small and microcaps is just not beneficial. These segments are nonetheless buying and selling at a hefty 40-45% premium to largecaps, regardless of macroeconomic uncertainties. We consider 2025 will probably be a painful yr for smallcap and microcap traders.”
The broader market sentiment stays weak, with solely 15 shares in your entire Nifty 500 index presently buying and selling above their 200-day shifting common. Traditionally, comparable market circumstances in 2008, 2014, and through the COVID crash led to eventual bottoming out.
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Is a backside in sight?
Amid the doom and gloom, some specialists see a silver lining. Mayuresh Joshi, Head of Fairness at Marketsmith India, means that Nifty could also be nearing a backside. “There’s a good probability the market will present power and resilience going ahead.”
Sandip Sabharwal, one other market veteran, sees a turnaround in FII flows on the horizon. “The US greenback index seems to be peaking, and rising market flows will quickly reverse. India, with an 18-20% allocation in world rising market funds, will get its justifiable share. This can be a good alternative for traders to build up essentially robust shares at engaging valuations.”
Whereas the Sensex’s February meltdown has rattled traders, historical past means that such sharp corrections typically pave the best way for a restoration. The important thing triggers to look at embody Trump’s subsequent transfer on tariffs, the trajectory of FII flows, and whether or not company earnings choose up within the coming quarters.
For now, traders ought to tread cautiously—use rebounds to exit overvalued smallcaps, however selectively accumulate robust companies that may climate the volatility. The ache may not be over, however seasoned traders know that market bottoms are the place the most important alternatives lie.
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(Disclaimer: Suggestions, strategies, views, and opinions given by specialists are their very own. These don’t symbolize the views of The Financial Occasions)
