Sensex, Nifty rose by more than 12% in April: Is the Indian stock market too optimistic because the right risks remain? | Einsmark news

Indian stock market today: A wave of optimism lifted the Indian stock market in April, with the Nifty 50 and Sensex achieving more than 12% of their low in April, while the broader markets also performed a strong comeback, with the Nifty Smallcap 100 index scoring 19.25% of its 7 -Ins have. While optimism about macro -economic resilience and policy support has fueled a setback, analysts warn that underlying challenges – from unresolved tariff disputes and a slowing global economy to persistent earnings downgrades – remain below the surface. What is behind the Indian stock market? Domestic brokerage firm Kotak Institutional Equities attributes the recent rebound to some complacency in the market. The fact that the Indian stock market is trading above ‘Liberation Day’ levels indicates that all issues have been resolved. However, the broker takes note of various constant challenges, including the expectations of lower global and domestic GDP growth, prolonged solution of reciprocal tariff and trading issues, further downgrades for earnings and continued rich valuations in sectors and enterprise-with even large cap that approaches fair value. Kotak doubts that trade agreements between different countries (including India) and the US can be negotiated during the remaining 75 days before the 90-day period of April 9. For the time being, most countries are equal to rates on their exports to the US, and there is no clarity on the final tariff levels and related issues (non-tariff barriers). This notes that the US has already imposed a reciprocal rate of 10% on all imports (higher on China and certain products, with exemptions on some others). High Hope: India and US trading issues It seems that there is a fair amount of faith and hope that India will be a relative beneficiary of rates and trade when the US is able to complete its tariff and trading arrangements with different countries. According to the broker, the level of final reciprocal rates for India (10%, 26%, or any other interim figure, as the case may be) be a lesser problem with non-tariff problems, and India’s trade surplus with the US may fall, if not immediately. The street generally believes that India will be in a decent position to reduce its trade surplus with the US by increasing the import of certain items from the US (defense and energy are most obvious). But the brokerage warnings that defense imports take a long time to finalize, and energy imports may face challenges, as other countries such as Europe, Japan, South Korea and Taiwan will also pursue similar strategies and rebalance their trade surplus with the US through more energy. In addition, the US has limited extra LNG export capacity. It has raised the stock on Europe over the past few years, with Europe reducing its imports from Russia to the Russia-Quine War. On non-tariff problems, the broker says it could be greater obstacles, especially if the US insists on difficult obligations such as greater access for US businesses in financial services, retail and agricultural imports. According to the broker, it would be difficult for India to enable unlimited access to agriculture and to allow retail by FDI entities without any restrictions, from a political perspective. Street to optimistic about earnings Outlook The broker believes that the street is too optimistic for earnings. It sees two differences towards its view: The street can be too bullish on revenue from export-oriented sectors such as cars, IT services, pharmaceuticals and specialty chemicals, given uncertainty about global GDP growth and US tariffs, and the street can be too optimistic about the profitability of consumer companies by accepting that they can retain the benefits of lower Grawapparates. In revenue, it emphasizes that high rates will harm car businesses such as Bharat Forge and Tata Motors and that delayed decision-making over customer IT income can affect. It notes that the valuations of IT stock are before the pandemic levels and do not take into account in a deep American slowdown or recession. With profitability, it warns that, although lower input costs can help, increased competition in categories makes it more difficult for businesses to maintain profits. Companies can reduce prices to gain market share, which harms margins. As an example, in its 4QFY25 commentary, they expect the gross margins to moderate and lower the EBITDA margin, which focuses more on volume growth than profitability. Disclaimer: The views and recommendations given in this article are those of individual analysts. This does not represent the views of coin. We advise investors to check with certified experts before making investment decisions. First published: 29 Apr 2025, 11:25 am Ist