Some short covering likely, but tariff flip-flop to weigh

Indian equity markets are poised for a cautious start on Monday following a landmark US Supreme Court ruling that deemed President Donald Trump's tariffs illegal. This decision has reignited discussions about trade policies, particularly as Trump announced a new 10% tariff, later escalating it to 15% on all imports. Although these rates are lower than previously established, the uncertainty surrounding tariffs, coupled with ongoing tensions between the US and Iran, is likely to temper market optimism. Experts suggest that while some short covering may occur, significant market gains are improbable, with projections indicating a potential rise of around 1%. Last week, the Sensex and Nifty experienced a modest increase of 0.4% amidst fluctuating trading conditions and rising Brent crude prices, reflecting concerns over possible military actions in the Middle East. Despite recent trade agreements between India and the US that reduced tariffs from 50% to 18%, the latest adjustments have left investors uncertain about the future of these negotiations. Analysts warn of continued volatility in the markets due to shifting policies and the impact on macroeconomic conditions. As investors await clearer earnings forecasts, market valuations remain stable, though overall enthusiasm appears subdued due to low inflation and stagnant GDP growth.