Market Faces First Test in Trump's Tariff Landscape

Monthly derivatives expiry, debut of punitive tariffs signal volatility ahead

- Dipti Sharma

The Indian stock market is poised for a test of resilience on Thursday, as a new round of US tariffs and the monthly derivatives expiry threaten a bout of volatility.

Stocks slumped 1% on Tuesday after the US slapped an extra 25% tariff on nearly all Indian goods, raising overall duties to as much as 50%—among the highest Washington has imposed on any trading partner. The market remained closed on Wednesday for Ganesh Chaturthi, making Thursday the opening day for investors in the punitive tariff regime.

Adding to the pressure is the monthly futures and options expiry, which typically falls on the last Thursday of the month. As traders roll over their positions to the next month's series, the pace and cost of these rollovers offer a window into market sentiment. A falling rollover cost, as seen on Tuesday, signals weakening bulls and strengthening bears.

The rollover cost fell from around 58 basis points or (0.57-0.58%) on Monday to 52 basis points on Tuesday, indicating a greater sway of bears over bulls, said Sriram Velayudhan, senior vice-president at wealth management firm IIFL Capital Services Ltd.

"A confluence of factors like geopolitical tariff tensions, the MSCI quarterly review and expiry-related rollovers (roll levels came under pressure) contributed to the bearish sentiments," he said.