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Investors are spooked amid escalating risk-off sentiment triggered by sweeping tariffs: How retail investors can navigate the storm
What Should Be Your Stock Market Investment Strategy Now?
What Should Investors Do Now? Investors worldwide are scaling back equity exposure amid escalating risk-off sentiment triggered by sweeping tariffs announced by US President Donald Trump. Fears of a global trade war, looming recession in the US—the “Mother Market”—and domestic growth concerns have collectively weighed on sentiment, dragging markets lower across the globe.
Wall Street and Asian equities registered sharp losses overnight. In contrast, Indian benchmarks—the Nifty 50 and Sensex—closed marginally lower in the previous session, slipping around 0.3% each. Despite the muted fall, negative sentiment continues to loom.
Volatility Ahead, Caution Advised
Market volatility is expected to persist in the near term, said Rajesh Palviya, Head of Technical Research at Axis Securities. He suggests increasing cash allocation by up to 10% and using market dips to gradually accumulate high-quality stocks.
Axis Securities maintains a bullish stance on large private banks, telecom, consumption, hospitals, and interest-rate-sensitive sectors. Palviya also sees long-term potential in select capex-driven stocks following recent corrections. However, the firm remains cautious on the IT sector due to anticipated weakness in U.S. discretionary tech spending.
How Retail Investors Can Navigate the Storm
Indian Pharma
The sector rallied recently, as it remained largely unaffected by Trump’s tariff measures. However, caution is advised — this reprieve may not last, and valuations remain stretched.
Large-Cap Value
With the Nifty trading at around 17x price-to-earnings, large-caps present relative value. Mid- and small-caps, however, continue to appear overvalued. That said, persistent foreign investor outflows — possibly driven by redemptions in emerging market funds — could keep pressure on large-caps in the short term, leaving them either range-bound or trending lower.
Focus on Domestic-Facing Stocks
Companies with a strong domestic demand base — such as banks, FMCG, and infrastructure players — are likely to be more resilient. Still, investors must remain mindful of elevated valuations in certain pockets.
Adopt a Cautious Stance
The Indian market is unlikely to remain immune to global turmoil. With financial markets across the board under pressure, India cannot entirely buck the trend. While divergence may occur over time, this appears to be the early phase of a prolonged economic conflict. Investors should avoid chasing rallies and instead consider incremental investments. Market volatility is expected to persist, creating periodic opportunities — but FOMO (fear of missing out) should be avoided.
Stay Diversified
In light of ongoing global uncertainties and a weakening US dollar, gold remains a strong diversifier with upside potential. A prudent strategy would be to maintain a balanced portfolio across equities, gold, and fixed-income assets, as the contours of a new global economic order continue to take shape.
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