With the US VIX and India VIX still trading above historical 90 – 95 per cent levels, volatility is still extremely high, and investors are advised against taking any new positions.
There’s a positive sentiment in the market after the United States announced the suspension of additional tariffs on India for 90 days, until July 9 this year. The 30-share BSE benchmark Sensex jumped 1,310.11 points or 1.77 per cent to end Friday’s session at 75,157.26. During the day, it gained 1,620.18 points or 2.19 per cent to 75,467.33. This surge led to the increase in the market capitalisation of BSE-listed firms from Rs 7,85,135.29 crore to Rs 4,01,67,468.51 crore (USD 4.66 trillion).
Similarly, the NSE Nifty surged 429.40 points or 1.92 per cent to 22,828.55. But how long is this positive sentiment going to last? According to Karan Aggarwal, co-founder and CIO, Elever, a quant-based PMS and portfolio manager, the tariff pause might have created a positive sentiment in the market, but investors must act cautiously as markets are oscillating wildly between ‘extreme pessimism’ to ‘irrational exuberance’ and vice versa.
“First of all, ‘liberation day’ announcements were just a pressure tactic to bring the world on negotiation table with a ‘temporary pause’ dangled like a carrot for joining negotiations. Tariffs were always supposed to be pushed to a later date or lowered as part of negotiations. Also, in a market frenzy, it must be remembered that tariffs are going to stay as base reciprocal tariffs of 10 per cent would remain applicable on US imports. Additionally, with Trump openly dividing the world into reasonable and unreasonable countries, US-China hard decoupling is almost a certainty, which means the trade war is still very much on, and nothing much has changed for global trade since yesterday night,” Aggarwal said.
As US, European and Japanese markets have reacted with 7 per cent – 10 per cent in a single session, risk-on trade is expected to result in a 5 per cent bounce from present levels in broader segments of Indian markets, with March 2025 highs acting as strong resistance while 21,800 acting strong long-term support.
Should Investors Take New Position?
With the US VIX and India VIX still trading above historical 90 – 95 per cent levels, Aggarwal said that volatility is still extremely high, and investors are advised against taking any new positions.
“US recession as US Atlanta Fed Real-time GDP indicator is already signaling negative growth for US in Q1. In the next six months, investors can deploy the money in a staggered manner, leveraging multiple dips expected on the way,” he concluded.
