Global economy and markets are on the brink of the worst disruption since the 2007 – 08 global financial crisis, besides the Covid pandemic, believe analysts. The belief stems from the likely global trade war that could be triggered by the imposition of universal and reciprocal tariffs by the US president Donald Trump.
US President Donald Trump, according to Nigel Green, chief executive officer of deVere Group, a global consulting firm managing nearly $12 billion in assets under management (AUM), doubled down on the most aggressive tariff policies seen since the 1940s in some respects, delivering a speech that, despite its rhetoric of economic strength, is set to cause concern through financial markets.
“The global economy and markets could now be on the brink of its most severe disruption since the 2007-08 financial crisis, besides the pandemic. This (tariff threat) is no longer just a warning, but is seemingly turning into an all-out trade war. The true extent of the fallout, however, has yet to be fully realised, especially as wider reciprocal tariffs are set to be rolled on April 2. Emerging markets, already grappling with tighter financial conditions, will be particularly vulnerable,” Green said.
The uncertainty unleashed by Trump tariffs, analysts believe, is reigning supreme now, which is weighing on the markets. In the ongoing chaotic scenario, they suggest, new news and developments can trigger wild market moves.
Thus far in calendar year 2025 (CY25), the Sensex and Nifty have slumped around 5 per cent each. From their peak levels, both these indices have cracked around 13 per cent and 14 per cent, respectively. Losses in the mid-cap (down nearly 20 per cent) and smallcap (down 23 per cent) indexes on the NSE from their peak levels have been deeper.
That said, analysts believe it would be difficult for the US to get away unscathed from the retaliatory tariffs imposed by China, Canada and Mexico. As a result, inflation in the US will rise and the Fed will sound hawkish.
“A sharp correction in the US stock market is likely. This will hurt Trump’s popularity and the negative wealth effect of a sharp market correction can aggravate the growth slowdown in the US. Soon the Trump regime will realise this. It is better for investors to wait and watch for the events to unfold,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
Purely from a market standpoint, the nervousness in the markets due to tariff uncertainty also got coupled with the emerging market versus the developed market attractiveness, China’s attractiveness amid policy changes, and tepid corporate results for the December 2024 quarter (Q4-FY25) back home.
Foreign investors have pulled over Rs 1 trillion from the Indian equity markets in the last few months. These investors, according to Vaibhav Sanghavi, chief executive officer at ASK Hedge Solutions, kept moving flows at the margin, depending on the relative attractiveness of the investible markets. The convergence of the above-mentioned factors, he said, exacerbated the pain from FII flows perspective.
The fall in the Indian equity markets, analysts say, has made valuations relatively attractive. Fairly valued growth stocks, particularly those focused on domestic consumption like financials, telecom etc, and exports to non-US markets like segments of autos, Vijayakumar said, can be slowly accumulated for the long-term.
Stock correction till now, according to Sanghavi, is likely to sow the seeds of reasonable gains over the next 24 months. “As the large-cap valuations have turned reasonable, this correction offers for nibbling in for fresh investments,” he said.
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