Equity markets saw a relief rally of sorts on Friday, with the benchmark BSE Sensex and NSE Nifty 50 indices gaining 1.9 per cent after US President Donald Trump’s unexpected announcement of a 90-day pause in the reciprocal tariffs announced a week earlier, even as tariff- tensions continued to rise between the US and China.
The Sensex jumped 1,369 points to close at 75,216.60 and the wider Nifty 50 surged 429 points at 22,828.55 level. Barring TCS and Asian Paints, all other components in the 30-share Sensex ended in the green on Friday. Steel, power, banking and finance, and automobile companies were among the major gainers.
Analysts at Emkay Global Financial Services believe the market is set for a strong rally and see the Nifty 50 at 26,000 by March 2026. That is a nearly 14 per cent gain from current levels. Notably, the Nifty had hit a life high of 26,277.35 last year.
Their views come at a time when equity markets have seen heightened volatility amid trade and tariff- concerns. After Trump announced reciprocal tariffs, several analysts said there was an increased chance of the US and global economy slipping into a recession and that roiled investor sentiments. The Nifty is down over 13 per cent from its peak thus far.
"The 90-day pause on US tariffs is seen as a major boost to global sentiment, reducing the risk of a deep US recession and financial market disruption," the analysts said.
Emkay expects a rebound in commodity prices and a wave of bilateral trade deals that will limit economic damage.
Back home, the Reserve Bank of India’s monetary policy committee reduced the repo rate by 25 basis points on Wednesday and several economists have said there could be another at least 50 bps reduction through 2025. The RBI’s easing stance is expected to support a recovery in consumption, the Emkay analysts said.
"With valuations correcting and earnings stabilising, Emkay believes conditions are ripe for a market rally," the analysts said.
Sectorally, they feel a soft US landing would bring tailwinds for technology companies, aiding employment and discretionary demand. Shares of software services companies have seen a sharp correction in the last few days over worries that any tariff- economic downturn would lead to lower spending by corporates and further delay the sector recovery.
This recent correction presents attractive entry points, said the Emkay analysts and the broking firm has now turned "overweight" on the technology sector. They are also overweight on consumer discretionary companies, including automobiles. On the other hand, they are "underweight" on financial companies, citing expensive valuations relative to growth prospects.
