Early Momentum Fizzles as Caution Prevails
India’s benchmark indices opened positively on Tuesday, continuing a five-day upward streak. However, gains quickly tapered as investors turned cautious. As of 9:17 am, the BSE Sensex rose a modest 28.49 points to 82,473.70, while the Nifty climbed 21.15 points to 25,124.35, reflecting a tentative market mood.
Sector-wise, technology, metals, and media stocks were among the top performers, while banking stocks faced mild pressure due to profit booking. Broader market indices like midcaps and smallcaps posted up to 0.5% gains, indicating continued investor interest beyond the blue chips.
Spotlight on US-China Trade Talks in London
Investor sentiment is now closely tied to the outcome of high-stakes US-China trade negotiations, which resumed in London on Tuesday. This meeting is a follow-up to a preliminary Geneva trade deal reached last month. At issue are export controls, particularly on rare earths and other critical inputs used in automobiles, semiconductors, aerospace, and defence.
The talks come amid rising friction: China’s exports to the US plunged 34.5% in May, the worst decline since the early days of the COVID-19 pandemic. The US, on its part, has accused China of withholding key exports, triggering supply chain fears.
Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamieson Greer are leading the American delegation. On the Chinese side, Vice Premier He Lifeng is representing Beijing’s interests. The talks are taking place at London’s historic Lancaster House, underscoring the diplomatic weight behind the discussions.
Tariff War and Market Sensitivity
The global financial markets have grown increasingly sensitive to geopolitical and trade policy signals, especially from the world’s two largest economies. The lingering tariff war, which began under the Trump administration, continues to cast a shadow over global trade. While certain tariffs were relaxed under the Biden administration, strategic sectors remain vulnerable to abrupt policy shifts.
Investors are hoping for some resolution or de-escalation that could remove uncertainty from global trade routes and manufacturing supply chains. Even a symbolic agreement or a roadmap for future talks could provide short-term relief for markets. However, a lack of clarity or further escalation could send shockwaves through commodity markets, equities, and global inflation trajectories.
Market Trends and Technical Signals
Despite global uncertainties, analysts remain moderately optimistic. According to technical expert Akshay Chinchalkar of Axis Securities, the market trend suggests an upward trajectory, especially if Nifty breaches the 25,200 mark decisively. He points out that the next resistance level is 25,800, a figure investor is watching closely.
However, with the recent rally stretching valuations, analysts warn that some profit booking may be prudent, especially ahead of any unforeseen developments from the US-China negotiations.
Foreign Institutional Investors (FIIs) have continued their buying momentum, picking up shares worth ₹1,992 crore on Monday, while Domestic Institutional Investors (DIIs) added ₹3,503 crore—signalling underlying confidence in India's long-term fundamentals.
Diplomatic Breakthrough or Temporary Truce?
According to Vikram Kasat, Head-Advisory at PL Capital, while the efforts to ease tensions are encouraging, a comprehensive trade resolution may still be far off. Investors, therefore, are balancing hope with realism. "In the meantime, markets will look for concrete progress, not just symbolic diplomacy," Kasat notes.
The broader implication is that India could benefit from any trade diversification, should global players seek alternatives to the China-centric supply chain.
Markets Need More Than Promises
The markets are speaking a clear language—they want certainty, not just dialogue. While the US-China trade talks in London may not deliver a full-fledged deal, even a positive tone or roadmap for further negotiations can act as a temporary stabilizer.
But as history shows, the global economy can’t run on hope alone. Investors will need concrete policy shifts, reduced trade barriers, and a stable geopolitical landscape to sustain momentum. Until then, expect markets to tread carefully—hopeful, but on edge.
(With agency inputs)
