Indian stock markets are poised for a subdued, potentially lower opening on Tuesday, May 13, as investors likely look to book profits following a spectacular rally in the previous session.

While positive global cues provided some support overnight, domestic factors including ongoing Q4 earnings, upcoming inflation data, and the recent surge itself suggest a period of consolidation or pullback.

Monday witnessed an extraordinary day on Dalal Street.

The benchmark Nifty 50 index closed decisively above the 24,900 mark, settling at 24,924.70 after a massive gain of 916.70 points or 3.82%.

The BSE Sensex mirrored this euphoria, jumping an impressive 2,975.43 points, or 3.74%, to close at 82,429.90.

This powerful rally was fueled by a potent combination of positive domestic and international news, primarily the de-escalation of military tensions between India and Pakistan following a ceasefire agreement, and optimism stemming from an apparent trade deal between the US and China which included a 90-day tariff relief period.

The surge saw broad-based buying across sectors like real estate, energy, telecom, infrastructure, and banking.

Early cues point to a softer start

However, early indicators for Tuesday’s session suggest a more cautious mood.

Gift Nifty futures on the NSE International Exchange were trading around the 24,914 – 24,922 level (down approximately 26 to 130 points from Nifty futures’ previous close, depending on the specific early reading), signaling a potential gap-down or weaker start for the domestic market.

This pullback would be natural after such a significant one-day gain, as traders look to secure profits.

Wall Street rallies, Asia mixed

Overnight, Wall Street’s three major indices closed sharply higher, buoyed by the US-China trade deal news which included a 90-day tariff reprieve.

The S&P 500 gained 3.26% to its highest close since early March, the Nasdaq Composite soared 4.35% (highest since late February), and the Dow Jones Industrial Average climbed 2.81%.

Asian markets on Tuesday presented a more mixed picture. While some, like Japan’s Nikkei (up ~1.7%) and South Korea’s Kospi (up ~0.65%), traded higher, Hong Kong’s Hang Seng was notably down around 1.25% in early deals, indicating some regional divergence despite the positive US lead.

Key factors influencing today’s trade

Several factors will be closely watched by investors today:

• Inflation data: The release of domestic inflation figures will be a key data point, potentially influencing expectations around future Reserve Bank of India policy.
• Q4 earnings: The ongoing fourth-quarter earnings season continues to provide stock-specific triggers and insights into corporate health.
• FII flows: Foreign Institutional Investors (FIIs) returned as net buyers on Monday, purchasing equities worth Rs 1,246.48 crore after a brief pause. Sustained FII interest is crucial for market momentum.
• Geopolitical monitoring: While the ceasefire has brought relief, investors will remain vigilant for any further developments in India-Pakistan relations.
• Technical levels: After Monday’s surge, where Nifty touched an intraday high of 23,944 before closing even higher, traders will be watching key support and resistance levels to gauge if the upward momentum can be sustained or if consolidation is in order.

Market experts anticipate that while the underlying positive domestic cues and global trade relief provide a supportive backdrop, the sheer magnitude of Monday’s rally makes some profit-taking or consolidation a likely scenario for Tuesday’s session.

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India has formally signaled its intention to levy retaliatory duties on a range of American goods, a direct response to the United States’ ongoing and recently revised tariffs on steel and aluminum imports.

In a formal communication to the World Trade Organisation (WTO), New Delhi outlined its position, challenging the basis of the US measures and reserving its right to implement countermeasures.

The crux of India’s contention lies in the nature of the US tariffs.

The US first imposed these duties – 25% on steel and 10% on aluminum – in March 2018, invoking Section 232 of its trade laws, which allows for such measures on grounds of “national security.”

These tariffs, which were subsequently extended in 2020, underwent another revision on February 10 of this year and are slated to take effect from March 12, 2025, for an indefinite period.

India, however, disputes this “national security” defense. In its communication to the WTO, dated May 9 and circulated at India’s request, New Delhi argued that the US actions are, in essence, “safeguard measures.”

India contends these measures are inconsistent with global trade norms established under the General Agreement on Tariffs and Trade (GATT) 1994.

“The US has not notified these measures to the WTO, but they are, in essence, safeguard measures,” the communication stated.

Furthermore, India pointed out that the mandatory consultation process stipulated under the WTO’s Agreement on Safeguards (AoS) has not been initiated by the United States.

Retaliation readied: counter tariffs on US products

As a consequence of what it deems unjustified US actions affecting $7.6 billion worth of its exports (with estimated duty collections amounting to nearly $1.91 billion), India is proposing a “suspension of concessions.”

This would manifest as increased tariffs imposed on a selection of American products.

The value of these counter-duties is intended to be equivalent to the economic impact suffered by Indian exporters due to the US metal tariffs.

The Indian government has also explicitly reserved the right to modify both the list of targeted U.S. products and the specific tariff rates applied, depending on how the situation evolves.

Thirty-day window before action

The notification to the WTO serves as a formal precursor to potential action. “Without prejudice to the effective exercise of its right… India reserves the right to suspend concessions after 30 days from the date of this notification,” the document clarified.

This provides a window for potential dialogue or resolution before India implements its proposed retaliatory measures.

The move signals India’s firm stance against what it perceives as protectionist measures disguised under national security claims and its preparedness to utilize WTO mechanisms to defend its trade interests.

The coming weeks will be crucial in determining whether a diplomatic solution can be found or if a new front in global trade disputes will open between India and the United States.

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Asian equities climbed sharply on Tuesday, extending a global rally after the United States and China agreed to pause their trade war for at least 90 days.

Japan’s Nikkei jumped 2% to reach its highest level since February 25, while Taiwan’s tech-heavy index also gained 2 per cent.

Chinese shares moved higher in early trading, and the MSCI’s broadest index of Asia-Pacific shares outside Japan touched a six-month peak.

On Wall Street, the S&P 500 advanced over 3 per cent and the Nasdaq surged 4.3 per cent, driven by gains in technology and consumer stocks.

The rally followed news that the US would reduce its baseline tariff rate on most Chinese imports to 30% from 145%.

China responded by slashing its own tariffs to 10% from 125%.

A separate White House order also cut the “de minimis” tariff on shipments from China to 54% from 120%, effective May 14, while maintaining a $100 flat fee.

Firms revise outlook for China’s economy

The trade reprieve has prompted several institutions to revise their outlooks for China’s economy.

UBS said in a note that China’s GDP growth in 2025 could reach between 3.7% and 4%, up from a prior estimate of 3.4%, citing a “smaller shock” to trade-related activity.

Morgan Stanley has also upgraded its near-term GDP forecasts for China.

The bank expects second-quarter growth to exceed its current 4.5% projection, driven by front-loaded exports as companies look to benefit from the reduced tariffs.

Third-quarter growth could also display temporary resilience, now expected to come in above 4%.

Nomura has upgraded Chinese equities to “tactical Overweight” and shifted some of its allocation from India into China.

Citi, meanwhile, lifted its target for the Hang Seng Index to 25,000 by year-end, with a forecast of 26,000 by mid-2026.

Baidu, Tencent, TSMC among technology, consumer and internet stocks in focus

The sectors expected to benefit the most from the trade truce include technology, consumer, and communication services, according to several analysts.

Citi strategist Pierre Lau, while remaining cautious on exporters, also prefers domestic-facing sectors, especially consumer and technology.

Morningstar’s Kai Wang said the current recovery may come faster than the last trade war cycle, which saw markets bounce back within a month of tariff relief.

Wang cited Baidu, Tencent and NetEase as attractive picks in China’s communication services sector.

Baidu and Tencent stand out for their investment in artificial intelligence, while NetEase offers exposure to the growing domestic gaming market.

He also highlighted TSMC as a key beneficiary due to its dominant position in advanced semiconductor manufacturing.

Citi Research flagged sectors highly sensitive to tariff changes, including communications infrastructure, tech hardware, and solar equipment.

Companies such as Innolight, JCET, Eoptolink, TFC Optical and JA Solar generate a large portion of their revenues from the US, making them likely beneficiaries of easing trade friction.

Citi is overweight on internet, technology, and consumer sectors, with top picks including Tencent, BYD, AIA, Huaneng Power, Atour and Anta.

The bank also prefers Hong Kong-listed H-shares over mainland A-shares, expecting US rate cuts to support the Hong Kong dollar.

Citi also upgraded PDD Holdings to “Buy,” viewing the trade truce as a boost for its Temu cross-border platform.

The firm expects improved profits in the second quarter as sellers benefit from preloaded inventory and better pricing leverage.

ETFs offer exposure, with caveats

Investors seeking broader exposure to Chinese markets without taking single-stock risk may consider exchange-traded funds such as the KraneShares CSI China Internet ETF (KWEB), iShares China Large-Cap ETF (FXI), and Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR).

However, analysts caution that these funds are prone to sharp price swings, reflecting the volatile nature of Chinese equities.

William Ma, chief investment officer of GROW Investment Group, said the rebound in Chinese stocks could mark the start of a sustained re-rating.

“Policy easing and targeted consumption support from Beijing could deliver an additional boost,” he said, adding that valuations remain undemanding.

Maybank’s CIO Eddy Loh echoed the view, highlighting opportunities in communication services and consumer discretionary stocks as markets reposition for a post-tariff landscape.

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China has quietly lifted a month-long ban on airlines taking delivery of Boeing Co. aircraft, Bloomberg reported on Tuesday citing people familiar with the matter, in what marks one of the first tangible signs of progress following a temporary de-escalation in trade tensions with the United States.

According to sources in the report who declined to be named due to the sensitive nature of the matter, Chinese authorities have informed domestic airlines and relevant government agencies that deliveries of US-made planes can now proceed.

Carriers have been granted flexibility to manage the timing and logistics of these handovers, which had been suspended amid escalating tariffs.

The move offers a shot in the arm for Boeing, which has been grappling with the dual challenges of supply chain disruptions and reputational damage.

The company had become an unexpected casualty in the broader US-China trade dispute, with Beijing retaliating against Trump-era tariffs by halting the acceptance of its jets and imposing steep duties on American aircraft.

Relief could be short-lived if both sides don’t reach a final deal within 90 days

The latest breakthrough comes as part of a broader trade truce between the two largest economies.

The United States has agreed to lower its average tariff rate on Chinese imports from 145% to 30% for a 90-day period.

In response, Beijing cut its own duties on US goods to 10% and dropped additional measures imposed since April 2024.

However, industry insiders caution that the lifting of the delivery ban could prove short-lived if the two sides fail to reach a more durable agreement within the three-month window.

“While deliveries can resume, the longer-term outlook depends on sustained diplomatic and commercial engagement,” one source said.

The Civil Aviation Administration of China and Boeing declined to comment on the latest developments.

Boeing spared cost of rerouting inventory

The reinstatement of deliveries comes as a relief for Boeing, which had begun making contingency plans to find alternate buyers for aircraft originally earmarked for Chinese customers.

Several jets had already been flown back to the US, while interest in the freed-up inventory emerged from carriers in India, Malaysia, and Saudi Arabia.

With approximately 50 aircraft slated for delivery to China this year, the move will spare Boeing the logistical complexity and financial hit of reassigning the planes.

It also unlocks significant payments once the deliveries are completed, helping the company stabilise its balance sheet.

China’s demand remains critical for Boeing despite turbulence

Despite recent setbacks, China remains a critical market for Boeing.

The country is expected to account for 20% of global aircraft demand over the next two decades.

In 2018, nearly one in four Boeing aircraft were delivered to Chinese carriers.

But the company’s presence in China has weakened in recent years, both due to political friction and internal missteps.

China was the first country to ground Boeing’s 737 Max after two fatal crashes, and trade tensions under both the Trump and Biden administrations steered large orders toward rival Airbus.

A separate crisis in January 2024, involving a mid-flight blowout of a door plug, further dented confidence.

Still, Boeing remains a central player in trade diplomacy.

Just last week, the White House announced a UK trade agreement that includes a $10 billion order for 32 Dreamliners destined for British Airways—underlining the growing role of aviation in high-level negotiations.

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Global defence spending hit a record $2.72 trillion in 2024, marking the sharpest annual increase since 1988. 

More than 100 countries raised their defence budgets, with Europe, Asia, and the Middle East driving most of the growth. 

The war in Ukraine has redefined how militaries operate. Cheap, fast, and scalable uncrewed aerial systems have replaced tanks and jets as the most effective tools of modern combat. Nations are drawing different conclusions. 

Ukraine is innovating quickly. Russia is scaling production. The United States is shifting procurement priorities.

The race is not only about who can build the most drones, but who can do it faster, smarter, and cheaper.

Is global defence spending entering a permanent high?

The 2024 numbers are hard to ignore. According to the Stockhold International Peace Research Institute (SIPRI), global military expenditure rose by 9.4% in real terms, the largest increase in over three decades. 

This is the tenth consecutive year of growth and a 37% jump since 2015. Military budgets now account for 2.5% of global GDP and 7.1% of total government spending.

The US remains the top spender at $997 billion, followed by China at an estimated $314 billion.

Russia has also raised its spending to $149 billion, 7.1% of its GDP, despite sanctions and economic pressures.

That is a year-over-year increase of 38%.

But it is Ukraine that stands out. With a military burden of 34% of GDP, it spends a higher share of its economy on defence than any country in the world.

This figure excludes the $60 billion in military aid it received from Western partners, which would push its real defence output to around $125 billion, that is more than India, France or the UK.

In Europe, Germany’s spending jumped by 28% to $88.5 billion, making it the continent’s largest spender, and now the fourth largest spender globally.

Poland’s budget hit 4.2% of GDP, driven by heavy investment in equipment from both Korea and the US.

Even traditionally restrained countries like Japan, Denmark and Sweden are now approaching or exceeding the 2% NATO threshold.

What changed on the battlefield?

The war in Ukraine showed that military power is no longer about who has more tanks. It is about who can produce drones faster, cheaper, and smarter. 

Ukraine built 2.2 million drones in 2024. That figure is expected to double this year. 

In comparison, Russia produced 1.5 million, including loitering munitions, fibre-optic drones and low-cost decoys designed to confuse Ukrainian air defences.

In place of armoured columns, Russia is now using motorcycles to bypass drone detection.

These bikes move in packs, often equipped with jamming equipment and used to rush Ukrainian positions at speed. 

Meanwhile, Ukraine has weaponized first-person-view (FPV) drones that cost $220 and can take out tanks worth millions. 

What’s driving this rapid technological advancement is the country’s bottom-up innovation model.

Soldiers test prototypes on the front lines. Manufacturers make adjustments in real time.

Combat feedback replaces bureaucratic procurement cycles. The entire process happens in weeks, not years.

Russia is pursuing a different strategy. It has centralized production in places like the Alabuga Special Economic Zone, where drone output doubled between 2023 and 2024.

It plans to produce 10,000 Gerbera decoy drones this year. 

Iran and China are supplying the electronics. Russian drones now include optical sensors, AI target recognition, and modems that enable swarm behaviour.

These are not concepts. They are in the field.

The US Army is learning from both countries. Secretary Daniel Driscoll has made clear that legacy systems will be retired in favour of autonomous platforms. 

The Pentagon has launched a $150 billion transformation through initiatives like Replicator and the Army Transformation Initiative.

The goal is to deploy thousands of cheap, autonomous, attritable drones across air, land, and sea.

Who controls the technology supply chain?

Most drones in Ukraine, on both sides, still rely on Chinese components.

Thermal cameras, carbon frames, and lithium-ion batteries largely come from Shenzhen. 

According to the FT, Ukraine’s drone firms spent over $1.2 billion on Chinese parts in 2024 alone.

But China’s September export controls have started to bite. Ukrainian producers now face long delays and rising costs. 

Russian firms, many operating through intermediaries in the Middle East and Central Asia, are still managing to keep production flowing.

While the US is trying to reshape this landscape, Europe lags behind for now. While its budgets are rising, procurement is fragmented. 

Based on data from the Draghi report, between mid-2022 and mid-2023, 63% of EU arms orders went to US suppliers.

Only 22% stayed within the bloc.

Ukraine, despite being at the centre of the drone revolution, cannot yet export its drones.

Domestic firms are pushing for reform, arguing that they need export revenues to sustain innovation. 

Many Western militaries now approach Ukraine as a live laboratory for drone warfare; studying its tactics but not buying its products.

Is there a sustainable economic model?

High defence budgets are colliding with fiscal reality. In Ukraine, all government revenue is now directed to the military. Pensions, education and health are funded entirely by international donors. 

In Germany and France, governments are issuing debt or cutting elsewhere to meet NATO targets.

Japan has raised taxes. The EU is considering allowing military spending under the European Investment Bank’s framework, something that’s never been done before.

For countries like Israel (8.8% of GDP), Russia (7.1%) and Saudi Arabia (7.3%), the defence sector is becoming an industrial anchor.

It fuels R&D, creates jobs, and supports geopolitical positioning. But this model relies on a permanent state of readiness, if not active war.

The US, while financially capable, is rethinking what value looks like in defence. Instead of investing in complex systems that take a decade to build, it now favours platforms that can be designed, tested and deployed within months.

The logic is borrowed from Ukraine, where private drone makers talk to frontline units daily and deliver new models weekly.

What does the next phase look like?

2025 is shaping up to be a transitional year. The world is not just spending more, it is spending differently.

Ukraine is scaling land-based drones for casualty evacuation and logistics. Russia is experimenting with drone swarms that share data mid-flight. The US is focusing on integrating AI into command and control. 

All three are preparing for a future where human presence on the front line is minimal.

But the biggest change is conceptual. War is no longer about territorial control. It is about exhausting the enemy’s systems, their logistics, communications, and air defences.

Drones, especially cheap and intelligent ones, are ideal tools for this. They force adversaries to spend more than they cost to produce.

This is the new calculus. Low-cost autonomy beats high-cost precision. A $1 million missile shot down by a $200 drone is no longer a hypothetical. It is happening every day in Ukraine.

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