Tariff Turbulence, AI reset & PSU Bank Surge: What’s next for Indian Markets? | PL Capital’s Amnish Aggarwal EXCLUSIVE

Markets begin trading on a cautious footing, driven by weak global cues and increasing geopolitical tensions. With tariff tensions flaring up again and India currently being part of a 10 per cent tariff regime with the United States, among a few other trading partners, market participants are closely observing how trade trends might influence market trends.

To help us understand the implications of this tariff tension and determine if this market volatility is temporary or structural, we bring to you insights by Amnish Aggarwal, Head of Research at PL Capital. He spoke exclusively to ET Now on what the future holds for the markets. Have a look.

According to the expert, the trade equation with the US is still very volatile. While there is an interim agreement in place, the last year has proved to us that the direction of policies can shift very rapidly.

This is not merely an India-US issue, of course, but a part of a larger geopolitical shift that includes the United States and its trading partners, said the expert.

In this context, the expert recommended being very cautious about the manner in which trade negotiations ultimately conclude and what the final tariff structure looks like. At this point, even a status quo that does not see any further incremental harm would be a relatively acceptable outcome for India.

Meanwhile, is important to look at other strategic trade relationships, especially with the EU. The European bloc, taken together, is roughly the same size as the US market, and the terms of engagement there seem to be more constructive, said the expert.

From a market perspective, however, the uncertainty of US tariff policies and the larger geopolitical shifts that are taking place would likely continue to keep volatility high in the short term. A stable period may take some time to arrive.

How long will remain uncertain?

According to the expert, the outlook remains highly uncertain. ‘We are certainly not at the end of the AI transformation cycle – in fact, we are only just beginning,’ said the expert.

What we have not yet witnessed is a dramatic slowdown in growth rates or a severe margin squeeze on companies, but what we are seeing is a structural reset.

This transition period is not likely to be sorted out in a quarter or two. The implications are potentially very profound and far-reaching.

While AI may ultimately unlock new opportunities and jobs in the long term, the short to medium-term outlook is very challenging – particularly for listed IT services companies.

Their current business models, revenue visibility, pricing power, and margins may all be threatened.

Markets do not like this type of ambiguity. Until there is a clearer understanding of how growth and profitability will shape up in an AI-driven world, the sentiment is likely to remain cautious.

That is exactly why we have maintained an underweight stance on IT services for the past couple of years. While valuations may look cheap, the uncertainty premium is still very high, said the expert.

IT Stocks: No bottom in sight yet, says Technical Analyst Kunal

From a technical standpoint, IT stocks do not appear to be near a meaningful bottom yet. After the initial 20 per cent correction seen across large-cap and mid-cap IT names, the selling pressure has continued, indicating that the corrective phase is still in play.

Importantly, the charts are not showing signs of strong accumulation. Volumes on the upside remain weak, and momentum indicators on both daily and weekly timeframes have not yet entered deeply oversold territory. Given this setup, it would be prudent to wait for clear signs of selling exhaustion before considering fresh exposure to the sector.

According to the expert, this trend can be seen from three different angles.

First, it is an efficient means of utilising the company’s strong cash flow position. By leveraging its existing telecom digital platform and tech infrastructure, Bharti Airtel is entering the lending space.

However, for a company to be successful in lending, it is not only dependent on technology but also on strong credit screening, risk management, collections, and delinquency management. If done correctly, the company’s broad reach provides a strong opportunity to scale this business.

In terms of value unlocking, it is too early to make any conclusions. However, this could be a strong driver in the future, and the related sectors, such as data centers could provide additional upside.

The Rs 590 crore impact is relatively small compared to the overall size of IDFC First Bank’s balance sheet. However, it does highlight potential gaps in the company’s internal processes and systems.

Typically, such announcements trigger short-term panic. If management acts decisively, safeguards the deposit base, and implements corrective measures, the situation should stabilise and recover over time, said the expert.

Are there trading opportunities in smaller banking names?

Two PSU banking stocks that are quite notable are Indian Bank and Union Bank.

Indian Bank has been performing extremely well over the last 4-5 years, moving from levels of Rs 300-400 to almost Rs 800 in November, and has further appreciated by another 20 per cent. The stock has been displaying excellent swing breakouts along with healthy trading volumes.

Union Bank has shown a bullish flag breakout above Rs 180-182 and has recently touched Rs 199. It seems that the PSU banks are entering a trend revival phase.

Nifty Expiry: Will the index stay range-bound today?

The market is likely to remain range-bound yet volatile today, with Nifty expected to trade between 25,500 and 25,800, and 25,500 acting as key support due to sustained put writing.

India VIX is around 14, reflecting elevated volatility. Bank Nifty should hold support at 60,500.

We remain more positive on PSU banks compared to private banks. For private names, Axis Bank presents a buy-on-dips opportunity, with 1,350 as support and 1,400 as near-term resistance, said the expert.

Auto sector ahead of monthly sales data

According to the expert, the auto sector performance improved significantly after GST implementation. The last 3-4 months have been robust.

Two-wheelers were already doing well. Passenger vehicles gained momentum recently, especially SUVs.

M&M has performed strongly in SUVs, but small car volumes at Maruti showed some fatigue last month.

Commercial vehicles look positive and may be entering a new cycle. Tractor sales have been strong, but El Niño concerns could impact the monsoon and affect farm equipment demand.

While momentum may continue for a few months, many stocks have already run up, so investors should be selective.

According to the expert, in ferrous metals, demand is strong, and profitability may improve in Q4. We see potential for reasonable incremental returns.

In non-ferrous metals like aluminium, the best may already be behind us. Some stocks have moved up largely due to price action.

We remain positive on the ferrous space.

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)