The next one month is likely to be volatile for Indian equities as the street will digest comments from President-elect Trump ahead of the Inauguration Day and its impact on Dollar as well as global bond yields, along with the outcome of Union Budget 2025 and the third quarter earnings, market investor Atul Suri said on January 9.
In conversation with CNBC-TV18, Suri, CEO of Marathon Trends-PMS said these uncertainties are keeping the benchmark indices rangebound near key support levels. Markets trading rangebound near key supports is a 'concern', added Atul Suri, as there could be a risk of a sharp move leading to a breakdown.
"There is a lot of pessimism and bad news which is getting factored in. We have spent a quarter or so doing nothing," said Atul Suri, underscoring that the last six months has not seen any substantial gains across-the-board in the markets. Nifty 50 is lower by 3.7% in the last six months, and the BSE mid and smallcap indices too have been flat in the past six months, consolidating in terms of price as well as a time correction.
However, one can expect stocks to settle down in the later half of the year, after some challenges over the next few months may keep index returns under check. "The recovery will be back-ended this year," said Atul Suri. "India's macros have slipped, and earnings are not there yet," Suri added.
After this phase of quiet consolidation, Atul Suri if of the view that largecaps will outperform the broader markets this year. "Largecaps relative to smallcaps, since 2020, have seen a relative underperformance for four years. Cyclically, this tends to be a turning point," Suri said. "We are at extreme, extreme underperformance of largecaps," he added.
Atul Suri is betting on the IT shares to pull the index out from this underperformance. "If I had to put my heart and hat on the largest Overweight on any sector in largecaps, it would be IT," Suri said.
For the rest of the market, the divergence in corporate earnings could also define the divergence in the market trend as well.
The global setup too has been an overhang on emerging market equities, with the dollar index rising since Trump's election victory to reflect the expectations of US fiscal easing and higher growth.
"On the dollar index, the move from 107 to 109 shows that the world is gearing up for inflation. Trump's proposals on tax cuts, tariffs may lead to inflation," said Atul Suri.
Earlier in January 2025, the Bloomberg Asia Dollar Index fell to a two-decade low on concerns that potential tariffs by President-elect Trump could lead to inflationary pressures. The Korean Won fell tested an over 15-year low in December, while Indian Rupee slipped to a record low in January. It is possible that central banks in Asia could respond to tariff measures by allowing their currencies to depreciate, according to forex experts.
The selloff in emerging market bond yields has intensified, with EMs selling sovereign bond yield worth $26 billion so far in 2025, over tariff-related jitters.
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