Sensex, Nifty wipe out weekly loss. But can this fragile rally survive Trump tariff tornado?

Clawing back almost all the ground lost during the tumultuous week, the Sensex on Friday surged up to about 1,500 points while Nifty came close to crossing the 22,900-level in a short-covering rally in which traders adjusted their portfolios to play catch-up with global markets after Thursday’s market holiday.

The trigger? US President Donald Trump’s abrupt pause on his April 2 tariff salvo—a move that came not from diplomatic benevolence, but, as market veterans point out, from the fury of the bond market. A massive selloff in US Treasuries this week pushed the 10-year yield to a precarious 4.5%, forcing the White House to blink. Trump’s backpedaling was pitched as a negotiation window, but most saw it as a desperate act to placate Wall Street.

The rally was dramatic, but the question haunting every investor’s screen now is: can this momentum sustain, or was this just a classic bear market head-fake?

Street View

“The gap up opening in the Nifty this morning is unlikely to sustain beyond a point given the elevated uncertainty in global markets,” warned Dr. VK Vijayakumar, Chief Investment Strategist at Geojit. “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%.” While the yield has softened slightly to 4.46%, the signal is loud and clear: the bond vigilantes are back.

And they’re not playing games.

Markets across the globe took the hint. With the US dollar index sliding to 100 and investors scrambling to recalibrate exposure to risk assets, India’s relative insulation from global trade flows suddenly looked like an attractive island in a sea of chaos.

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But Vijayakumar isn’t ready to sound all-clear yet. “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.” His advice: stick to safety, stick to largecaps.

And yet, even amid the noise, a quiet recalibration seems underway. Seshadri Sen, Head of Research and Strategist at Emkay Global Financial Services, has turned tactically bullish. “The pause in tariffs by the US is a big positive, and now we see little chance of the draconian 2-Apr proposals seeing the light of day,” he said. “We pivot on our market view and now expect a strong India equities rally with earnings bottoming out, moderate valuations, and global uncertainty substantially reduced.”

Sen also pointed to sharp corrections in valuation metrics—particularly the median price-to-earnings ratio for the BSE 500, down 21% over the past six months—as a sign that the worst might be behind for Indian equities, especially in the small- and mid-cap segment which has underperformed largecaps all year.

Also read | Jefferies’ Chris Wood raises India bet at the cost of Taiwan amid Trump tariff turmoil

Rahul Singh, CIO-Equities at Tata Asset Management, also made the case for cautious optimism. “The recent global tariff changes have added uncertainty to markets, but India is better positioned than before,” he said, noting that India’s lower dependence on US trade and robust domestic demand insulates it better than most. “Falling global prices of crude and metals may support Indian companies by reducing input costs. Sectors like banking, pharma, and energy now offer attractive value with solid balance sheets.”

Singh sees the current phase as a potential inflection point, where the market narrative shifts from global macro panic to bottom-up stock selection. “As the market moves from global trends to company-specific opportunities, disciplined investing in large cap, flexi cap, and multi-asset funds, especially those with gold exposure, can help reduce portfolio risk,” he said. His message: brace for volatility, but don’t miss the forest for the trees.

Even brokerage house Choice sees reason to believe India’s moment might just be beginning. Evaluating Trump’s April 2 tariff shock and the April 9 volte-face, they argue that “India markets are at the lower end of the market bottom” and that “despite the pause and associated negotiations, markets should stabilise and start looking up.”

Their base case assumes tariff rates for all non-China countries will settle in the 10–25% range, with the broader trade war risk potentially getting more concentrated on China. That could be a tailwind for India in the long run. “With Trump’s spanner in the investing wheel not out of the way but getting more pointed on China, we believe it is long-term Advantage India amongst the EMs; provided we drive well.”

So where does that leave the retail investor?

“Start building slowly,” advises Sudip Bandyopadhyay, Group Chairman of Inditrade Capital. “Do not put all the money together to work because there may be further volatility, further correction. So, keep investing in a piecemeal—maybe 10-20% over the period of next 10-15 days. That is how you should plan it.”

He offers a simple but effective mantra: “If you are already invested in the market, please do not panic. Remain invested. Things will settle down—it is a matter of time.”

The Bottom Line?

The Friday rally was fiery, but fragile. India has all the right ingredients—strong macros, cooling commodity prices, and relative geopolitical insulation. But with global uncertainty still high and the bond market calling the shots in Washington, sustained upside will depend on whether policy clarity follows the policy panic.

For now, the bulls may have a reason to smile—but it’s the cautious investor who may end up having the last laugh.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times)