Talking Point This Week — Different Tunes

The signs were there for the tune to change. There was pessimism, with the Nifty Smallcap 250 trading at 21x FY26E EPS of Rs 650 versus the 10-year average for Nifty Smallcap 250 at 28x. Promoter buying activity and sound commentary were being ignored, making it a classic case of fear on the street. And the market was going down on very low volumes. Remember, February saw lowest average volumes traded in last one year, with average turnover in February at Rs 75,000 crore versus peak of Rs 1.3 lakh crore in June 2024. But then, the heavens obliged the bulls. Dollar index fell below the 105 levels, oil dipped to its lowest level since 2021 and US President Donald Trump, after screaming that tariffs are here, compromised a little on them. And the Reserve Bank of India did all that it could to aid the liquidity measures in the current scenario. All this led to the markets moving higher in the latter half of the week. German stocks zoomed on debt policy and defense spending news, as did the Indian stocks. Here's the set of key talking points this week..It was the tariff week. And some of those came in being, and some didn't. From both sides. Even as Donald Trump levied tariffs on China, China hit back as Trump’s new tariffs came into effect. It imposed levies of up to 15% on American agricultural goods and banned exports to some defence companies, escalating a trade war between the world’s two largest economies. Canada also retaliated, putting tariffs on $107 billion of US products. Mexico, the biggest US trading partner, took a different approach. President Claudia Sheinbaum lied up to her attempt to negotiate with Trump, announcing (in Trumpian style) that tariffs and other measures are coming—but not until Sunday. However, a lot of it changed on Thursday, with the latest backpedal by the White House in the face of furious fallout both at home and abroad. As Bloomberg mentioned, with markets plummeting, automakers yowling and Canada pounding its chest, Trump announced he would exempt some goods from both countries, but only for a month. The announcements around tariffs are changing faster than the weather.Also, while people may start getting scared about the economic impact of all of these on the US economy, the big fish were unmoved. Goldman Sachs Chief Executive Officer David Solomon believes there’s a "very small" chance of the US economy entering a recession. Trump is acting on the view that imbalances exist in trade, Solomon said. Blackstone Chief Executive Officer Steve Schwarzman said his firm's survey shows the economy is in good shape, with none of the executives expecting a recession this year..European Union leaders gathered for an emergency summit on Ukraine and defence as they scramble to respond to the US’ abrupt U-turn on foreign policy involvement in the region. Hungary may throw a wrench in the works but Norway’s prime minister offered support with a “substantial” boost in its aid to Kyiv. And while German defence names have zoomed, Germany’s bonds have plunged in recent days, dragging down debt markets around the world, as Berlin’s plan to unlock hundreds of billions of euros for defense and infrastructure investments makes investors worry about a resurgence of inflation. Yields on German government bonds continued to move higher, a day after recording the biggest daily jump since Germany’s reunification in 1990. 10-year euro zone inflation swaps jumped by 14 basis points in the wake of political news out of Germany. The German equity markets, though, are being driven higher by optimism around potential German fiscal policy reforms and a tariff reprieve for automakers. What has also helped is a change in defence shares after regional leaders held security talks that touched on bolstered military spending. Companies like Germany’s Hensoldt, Italy’s Leonardo, Dassault Aviation, Sweden’s Saab, France’s Thales and Britain’s BAE Systems crowded the top of Stoxx 600 movers by and large. This remains the country to watch in the short term!.Since February 2025, under new Governor Sanjay Malhotra, the RBI implemented a series of measures aimed at easing financial conditions and reviving economic momentum. These include a 25-basis-point cut in the repo rate to 6.25%, the first reduction in nearly five years, signalling a shift towards growth support. This week, the RBI said that it will inject further liquidity into the banking system by conducting open market operation purchase auctions and long-tenure dollar-rupee buy/sell swaps. The RBI will conduct OMO purchases of government securities worth Rs 1 lakh crore in two tranches of Rs 50,000 crore each. The first auction will be held on March 12 and the second by March 18. Further, the central bank has also decided to hold a dollar-rupee buy/sell swap auction of $10 billion for 36 months to be held on March 24. As I tweeted, once the tide turns, the street will recognise that the RBI did a significant bit to aid the requirements and the sentiment of the economy..BofA Securities, in a note on Wednesday, turned constructive on Nifty. Their note said that given its now trading at its long-term average valuation on earnings growth estimates—which are conservative versus the street—the brokerage sees potential for 14% returns for Nifty in 2025 with its index target of 25,000 by December.Jefferies believes that India's underperformance reached reversal levels, and with the Dollar Index down 4% from the peak, FPI flows might turn. Jefferies notes that India's positioning by EM funds is at decadal low and near-term positives such as economic uptick and liquidity easing may lead to a near-term bounce. Quant Mutual Fund, in a note to their unitholders, mentioned that their analytics are now showcasing that a trading bottom is round the corner and that they are participating in both large and mega-large caps, while selectively increasing their small-cap exposures in most of their equity schemes.As we wrap, the memes on what the US President does have zoomed. Moving from the kind of actions on tariffs to golfing, to crypto decisions and geopolitics, they make it sound that it’s a nation being run like a business, with negotiations and re-negotiations. As you wait for more newsflow there and brace yourself for an India loss in the Champions Trophy finals (I fear and I feel bad about it), the memes may be your way to having a great weekend. Ofcourse, combine these with some pickleball (a craze now) and a dinner at some new restaurants in your neighbourhood (yes, the consumption economy needs it), and it promises to be a better weekend.Until Next Time…Niraj Shah

Talking Point This Week — Different Tunes

From Donald Trump's latest backpedal on tariffs to Indian central bank's fresh liquidity push, here are the key talking points of this week.

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