The United States’ 90-day pause on tariffs isn’t just a breather—it’s a game-changer. The draconian proposals floated on April 2, which threatened to upend global trade, now look dead in the water, and that’s a massive win for markets worldwide, especially India. We’re pivoting hard on our market outlook: expect a strong rally in Indian equities as earnings bottom out, valuations moderate, and global uncertainty takes a backseat. The Nifty is on track to hit 26,000 by March 2026, and we’re doubling down on Technology, Materials, Discretionary, and Healthcare while slashing Staples to zero and staying underweight on Financials. Volatility will linger as tariff news ebbs and flows, but smart investors should buy the dips and ignore the noise.
US Tariff Pause: A Sigh of Relief
The 90-day tariff suspension signals a critical shift: structural damage to the economy and financial markets has become a binding constraint for US trade policy. Forget the doomsday scenarios of a deep US recession—while a mild slowdown remains possible, the pause paves the way for a flurry of bilateral treaties over the next three months. The result? A tariff regime that’s only marginally more protectionist than before, not the autarchic nightmare many feared. This stability rules out major dislocations in global financial markets and sets the stage for a sharp rebound in commodity prices, a boon for India’s export-driven sectors. The US soft landing is real, and India stands to gain big.
India’s Sweet Spot: Growth on the Horizon
India is now in a prime position for FY26. The Reserve Bank of India (RBI) is on an aggressive easing path, with its latest 25 bps repo rate cut to 6% on April 9, 2025, and a shift to an ‘Accommodative’ stance. Add to that the RBI’s moves to ease lending restrictions—tweaks to co-lending, securitisation, and credit enhancement rules—and you’ve got a recipe for a credit boom. Loan growth, which limped at 11% in FY25, is set to accelerate in FY26, fueling domestic consumption. The capex cycle remains resilient; while government spending may slow, sectors like power will keep growth ticking. A US soft landing further boosts Technology, driving employment and discretionary demand—think autos and consumer durables. We see little risk to our FY26 Nifty EPS forecast of 1,156, and the stars are aligning for a market surge.
Earnings and Valuations: The Turnaround Begins
Q4 FY25 earnings were muted—Emkay’s universe saw a tepid 2.1% YoY topline growth and a 7.2% PAT decline, dragged down by margin compression in Discretionary and a high base in Energy. Consensus Nifty estimates mirror this, with 1.5% revenue growth and a 6.3% PAT drop. But dig deeper, and the picture brightens: excluding BFSI, Nifty margins are set to expand 71 bps to 20.1%, and sectors like Telecom, Healthcare, and Materials are posting solid results. The downgrade cycle is nearing its end, and valuations have corrected—the BSE 500’s median PER has fallen 21% in six months. With earnings bottoming out and global uncertainty easing, small and mid-caps (SMIDs) are poised to reverse their underperformance against large-caps.
Sectoral Bets: High-Beta Is the Way
We’re going high-beta for this rally. Technology gets an overweight (OW) rating as its deep correction has made valuations irresistible—Wipro joins our model portfolio. Materials also goes OW, with steel (Tata Steel added) set to ride the commodity bounce-back. Discretionary remains our top OW, fueled by autos and consumer demand, while Healthcare holds steady. We’re slashing Staples exposure to zero—FMCG faces structural derating and will lag in a high-beta market, so we’ve dropped Dabur and Godrej Consumer Products. Financials stay underweight; despite RBI’s boost, they’re overvalued relative to growth. We’ve also cut National Aluminium and BPCL, focusing on sectors with stronger tailwinds.
The US tariff pause, RBI’s dovish drift, and India’s growth recovery are converging to create a rare opportunity. Yes, tariff news will stir volatility, but that’s just noise—buy the corrections. India’s equity market is on the cusp of a powerful rally, and with Nifty targeting 26,000 by March 2026, now’s the time to lean in. The global stage is resetting, and India’s ready to shine.