Impact of Trump-Zelensky Meeting on Indian Stock Market: Key Takeaways

The Indian stock market is set for a rough opening following the Trump-Zelensky meeting, which could increase geopolitical tensions and negatively impact India’s economic ties with European countries. Key issues identified include pressure on the Indian Rupee, potential inflation, and intensified selling by foreign institutional investors. Analysts advise caution as these developments could deteriorate market conditions further upon reopening.

The Indian stock market is bracing for a tumultuous opening on Monday following a significant downturn on Friday. The outcome of the recent Trump-Zelensky meeting is anticipated to exacerbate existing geopolitical tensions, particularly impacting India’s economic ties with European countries amid the ongoing Russia-Ukraine conflict. Analysts are concerned that the United States’ alignment with Russia may hinder India’s benefits derived from discounted Russian oil exports, thereby affecting market performance.

Market experts have identified five primary consequences from the Trump-Zelensky meeting that may influence the Indian stock market: increased geopolitical tension, negative impacts on Indian exports, pressure on the Indian Rupee, inflation concerns, and intensified selling by foreign institutional investors (FIIs). These factors collectively suggest a pessimistic outlook for Indian markets when trading commences.

1. Geopolitical Tension: Analysts have noted that the U.S. government’s recent stance may leave Ukraine vulnerable, similar to past geopolitical scenarios. “Trump-Zelensky meeting outcome is disappointing for India as the US government has left Ukraine at its mercy… This will hurt the Indian stock market when it reopens on Monday,” said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.

2. Hit on Indian Exports: The war and subsequent anti-Russian sanctions had positioned India as an oil exporter to Europe, capitalizing on discounted Russian oil. However, with the new developments, this revenue stream is jeopardized, which could lead to further declines in the market. Jain expressed that the market is likely to react negatively to these potential shifts.

3. Pressure on the Indian Rupee: The alignment of the U.S. with Russia following the meeting is likely to elevate the value of the U.S. dollar, placing additional pressure on the Indian Rupee. “This Trump-Zelensky meeting outcome is good for the US, and hence, the US dollar is expected to gain further,” Opined Avinash Gorakshkar, Head of Research at Profitmart Securities.

4. Inflation Concerns: Renewed geopolitical uncertainties may also influence oil prices, leading to inflationary pressures within India. As the country imports approximately 85 percent of its oil demand, any increase in global oil prices will directly impact domestic economic conditions, according to Gorakshkar.

5. FIIs’ Selling: Following the meeting, the selling behavior of FIIs is expected to escalate, compounding market pressures. As outlined by Anshul Jain, the short positions retained by FIIs indicate a bleak recovery outlook for the Indian stock market following the lackluster meeting results. “Chances of recovery in the divergent Indian stock market has become grim after the Trump-Zelensky meeting,” Jain added.

The Nifty 50 index recently broke significant support levels, indicating further declines may occur in the near future. The market response is likely to reflect the apprehension surrounding the implications of the Trump-Zelensky meeting, which has cast doubt on future U.S. involvement in providing support to Ukraine.

In summary, following the Trump-Zelensky meeting, the Indian stock market faces multiple challenges ranging from geopolitical tensions and revenue implications to currency pressures and heightened inflation. These elements combined pose a significant concern for investors as the market gears up for opening on Monday. Analysts urge caution and close observation of market trends in light of these developments.

Original Source: www.livemint.com