Indian stocks are poised for a promising start on Tuesday as investors respond to the latest developments in tariff negotiations and keep a close watch on the flow of foreign funds.
The dollar index receded from its highest point in over two years following U.S. President Donald Trump's decision to postpone tariffs on Mexico and Canada for a month, along with his announcement of further discussions with China.
With Trump leveraging tariffs as a strategic bargaining tool, there is considerable ambiguity surrounding the potential impact on corporate earnings, the U.S. dollar, inflation, and the global economy.
Analysts from J.P. Morgan Asset Management have voiced concerns that a trade war could introduce a stagflationary effect into the investment landscape, thereby increasing inflation and interest rates while hindering growth and profitability.
On Monday, India’s benchmark indexes, Sensex and Nifty, both decreased by roughly half a percent, although they rebounded from their daily lows, driven by significant gains in the financial sector.
The Indian rupee crossed the 87 mark against the dollar for the first time, closing at 87.18 per dollar, raising alarms about a potential rise in imported inflation and the country's import expenses, just days ahead of the Reserve Bank of India's monetary policy review.
Asian markets bounced back from significant losses in the prior session due to tariff reprieves.
Gold inched higher after reaching a record high previously, driven by dollar weakness. Oil prices, however, declined, with WTI crude futures dropping nearly 1 percent following Trump's decision to postpone the imposition of tariffs on the U.S.'s two largest foreign crude suppliers by a month.
U.S. equities recovered from earlier substantial losses but still ended significantly lower overnight after Trump announced a one-month suspension of tariffs against Mexico following an agreement on border security to stem the influx of fentanyl and illegal migrants into the U.S.
Investors also evaluated data indicating U.S. manufacturing growth for the first time in over two years in January.
The tech-centric Nasdaq Composite fell by 1.2 percent, the S&P 500 decreased 0.8 percent, and the Dow slipped 0.3 percent.
Post-market closure, Canadian Prime Minister Justin Trudeau revealed that proposed U.S. tariffs would be paused for at least 30 days.
European stock markets closed with sharp declines on Monday after Trump enforced levies on imports from Canada, Mexico, and China, cautioning that tariffs on the European Union were inevitable.
The pan-European STOXX 600 dropped 0.9 percent. Germany's DAX fell 1.4 percent, France's CAC 40 decreased by 1.2 percent, and the U.K.'s FTSE 100 declined by 1 percent.
