Nifty, Sensex Rally Nearly 2% After US Tariff Pause

Indian benchmark indices opened sharply higher on Friday, fuelled by global optimism following a temporary pause in US trade tariffs. However, the gains were more modest than some domestic investors had anticipated, as renewed fears of an intensifying US-China trade war kept market sentiment in check.

The Nifty 50 jumped 2.12% at 22,859.35, while the BSE Sensex surged 1.99% to 75,319.35, snapping its one-day losing streak. The rally was partly a catch-up move, as domestic markets had remained shut on Thursday for Mahavir Jayanti, missing out on a sharp rebound seen in Asian markets a day earlier.

"Investors are hopeful that this move opens the door for negotiations and potentially reduces trade tensions, especially regarding the higher tariffs of 15-50% that the US had earlier imposed on several countries, including India," said Vikas Jain, head of research at Reliance Securities.

Nifty Metal and Nifty Pharma led the gains on Friday. Nifty Metal was up 4.44% with Tata Steel Ltd. and JSW Steel Ltd., rising over 5% each. Nifty Pharma was up nearly 4% with Granules India Ltd. and Biocon Ltd. leading the advance.

The rebound in equities was triggered by US President Donald Trump’s announcement on Wednesday of a 90-day pause on tariffs on non-retaliating trade partners.

During this interim period, his administration would charge a 10% tariff on imports, instead of the higher reciprocal levies announced by him last week.

"Based on the fact that more than 75 countries have called Representatives of the United States...to negotiate a solution...and that these countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately (sic)," Trump posted on Truth Social.

Even as Trump offered relief from tariffs to over 75 countries, he raised the import duties to a massive 125% from 104% on Asian economic rival China. This came hours after China retaliated against the US by announcing additional 50% tariffs, taking the overall levies on American imports to 84%.

This led to a historic rally on Wall Street, with the Dow Jones Industrial Average soaring over 3,000 points—its biggest one-day gain after the 2008 financial crisis.

However, the euphoria was short-lived. On Thursday, US equities reversed sharply, with the Dow falling more than 1,000 points, as investors reacted negatively to news that the US would raise total tariffs on Chinese imports to 145%, excluding key sectors such as pharmaceuticals, copper, semiconductors, and energy.

The Asian indices taking cue from the US markets declined on Friday. Japan’s Nikkei 225 dropped 4.55%, South Korea’s Kospi declined 1.66%, and Australia’s S&P/ASX 200 slipped 1.93%, as investors feared the renewed trade tension could derail global growth.

"This pullback reflects growing investor anxiety about escalating tensions between the US and China," said Jain.

Currency markets saw heightened volatility. The Indian rupee opened 45 paise stronger at 86.25 per US dollar, buoyed by a sharp fall in the dollar index, which hit its lowest level in over a year.

"The rupee may trade in a range of 86.00 to 86.60 today," said Anil Kumar Bhansali of Finrex Treasury Advisors, citing ongoing dollar weakness and exporter activity.

On the institutional front, foreign portfolio investors stayed net sellers for the eighth day, offloading Rs 4,358 crore of Indian equities on Wednesday. Domestic institutional investors bought Rs 2,977 crore worth of equities, cushioning the downside.

In March, the overseas investors had net offloaded equities worth Rs 3,973 crore, according to the National Securities Depository Ltd.'s data.