Moneycontrol Pro Panorama | Explosion of optimism

The Indian markets have regained ground lost in the lead-up to India's military response whereas Pakistan still has some recovery ahead.

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

The equity markets in India and Pakistan are in a celebratory mood following a ceasefire mutually agreed upon by their armed forces. At the time of writing this newsletter, the Indian stock market has risen by 3.27 percent while the Karachi Exchange, which experienced a sharp decline during the conflict, has surged by 8.85 percent. The Indian markets have regained ground lost in the lead-up to India's military response whereas Pakistan still has some recovery ahead.

Adding to this positive sentiment was a significant decision by the United States to drastically reduce tariffs on Chinese goods for the next 90 days, slashing them from 145 percent to 30 percent after trade discussions in Geneva. In response, China announced it would lower its tariffs from 125 percent to just 10 percent over the same period.

This US-China agreement has boosted European markets, where stocks have risen nearly 2 percent, even as the Shanghai Composite ended the day with a modest gain of 0.8 percent. The Hang Seng index also saw an impressive rise of 3.40 percent while US futures are trading 2.20 percent higher.

Despite this global relief rally, a critical question looms: Will this momentum be sustainable?

From an Indian market standpoint, the ceasefire appears to be merely a temporary halt in hostilities with Pakistan. Existing trade restrictions remain intact, and their minimal impact on the economy is unlikely to change anytime soon. Conversely, Pakistan faces ongoing challenges, with soaring food prices and a persistent water crisis adding to the strain.

While Indian markets initially dipped amid uncertainty, the decline was cautious, as investors waited to gauge the situation's escalation. The relentless military pressure exerted by Indian forces indicated that the limited conflict would not drag on for long. Within a week, Pakistan called for a ceasefire, and both nations have begun discussions to establish future protocols.

The promise of the US-China negotiations has become a key point of optimism for investors. President Donald Trump's willingness to negotiate and reverse many tariffs will facilitate renewed trade. Although a 30 percent tariff on Chinese imports remains, American consumers may feel the pinch; but at least they can expect products to remain available on store shelves.

While geopolitical tensions may see some resolution, economic challenges linger. The market may continue to react positively as these tensions ease, but the overarching issue of sluggish growth persists. This lack of economic growth was evident even before Trump took office, and his imposition of tariffs exacerbated the situation. Growth will likely remain a struggle, even with the rollback of many tariffs.

Trust remains an unresolved matter, both concerning Trump and Pakistan, as both parties are notorious for their unpredictability and readiness for confrontation. Recovery for both global markets and the Indian economy will take time. As the rally progresses, stock prices will ultimately realign with fundamental economic indicators, and corporate earnings reports will guide future movements.

Investing insights from our research team

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What else are we reading?

Moneycontrol Pro Market Outlook | Ceasefire adherence to decide market direction

10 lessons from the 4-day conflict with China-backed Pakistan

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Beyond the Trade War: How China wants to usher in a new global world order

UK FTA can help Indian IT manage costs better, but no immediate earnings boost

UK-India FTA | Opportune time for cotton textiles to weave better fortunes

Budget games, taxes and Treasuries (republished from the FT)

US tariff policy accelerates deeper structural changes (republished from the FT)

War, insurance, and the limits of protection amid India-Pakistan tensions

The making of India’s drone military-industrial complex

India’s aerial shield has held up well, but will need upgrades to combat China’s stealth aircraft

Raising the cost for Pakistan: Lessons from the past

India’s role in helping Red Army withstand the Siege of Stalingrad

Tech and Startups

Push to equip every soldier with anti-drone tech, says Paras Anti-Drone CEO

Technical Picks: ESCORTS, PEL, DIXON

Shishir Asthana
Moneycontrol Pro