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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
Indo-Pak Ceasefire: What’s next for Indian equities?
Trump’s drug pricing regulation: How does it impact Indian pharma?
SBI-Sumitomo deal for Yes Bank – Who gains the most?
Swiggy Q4 FY25: Growth on the table, Quick Commerce remains a drag
Sticky performance — Pidilite delivers stability in tough Q4
Navin Fluorine: Multiple agreements, new capacities strengthen outlook
SJS Enterprises: Strong Q4 FY25, new products, clients growth drivers
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
A new chapter awaits Yes Bank, post Japanese investors' entry
Chart of the Day: Investors have again fallen into timing the market trap
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
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