Benchmark stock market indices opened flat on Tuesday, but gained some momentum a few minutes into trading fuelled by auto sector stocks.
The S&P BSE Sensex added 148.51 points to 81,934.25, while the NSE Nifty50 gained 40.25 points to 25,109.50 as of 9:28 am.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said that it is important to understand that the underperformance of the Indian market during the last one year is mainly due to the poor earnings growth and high valuations.
“A sustained rally is possible only when these fundamental factors change. It is also a fact that Trump tariffs have impacted the sentiment. These fundamental factors are now set to change. The bold reforms – both fiscal and monetary – that have been implemented this year have started yielding results and this trend is likely to gather momentum, going forward,” he added.
The market will soon start discounting the positive developments. An India-US trade agreement without the penal tariffs, if that happens, can be a shot in the arm for markets. India will continue to attract premium valuations due to its superior long-term growth and earnings potential. But in the short run valuations matter. Retail investors chasing highly valued smallcaps are taking unnecessary risks. This price-agnostic behaviour is irrational and is unlikely to fetch decent returns in the long run.
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