# us-china trade war, buffett's japan bet, gold at all-time high & rupee's recovery
april 12, 2025
what matters now
Markets experienced extreme volatility driven by Trump's tariff announcements: a 125% Chinese reciprocal tariff followed by temporary pause that triggered relief rallies. US bond markets saw their largest weekly yield spike since the 1980s, with Treasury sell-offs raising systemic concerns. The dollar index plummeted below 100 for the first time in nearly two years, while gold surged above $3,200 to all-time highs. TCS's subpar earnings and delayed wage hikes signal IT sector headwinds amid global uncertainty. Meanwhile, Warren Buffett doubled down on Japan, RBI announced massive liquidity injections, and UPI suffered another major outage.
Tariff whiplash drives extreme market volatility
The markets just survived one of the most volatile weeks in recent memory, dominated by Trump's tariff policies ricocheting through global markets. China responded to earlier US measures by hiking tariffs on American imports to 125%, which was followed by Trump imposing 145% tariffs on Chinese goods (125% reciprocal plus 20% fentanyl-related). Just when markets were fully pricing in a full-blown trade war, Trump surprisingly announced a 90-day pause on additional tariffs for 75 countries, including India, triggering a substantial relief rally.
The resulting market whipsaw was extraordinary. India's benchmark indices surged on Friday, with the Nifty gaining 1.92% (429 points) and Sensex climbing 1.77% (1,310 points), erasing most weekly losses. The pause provided particular relief to export-oriented sectors, with metals surging 4% and significant gains across pharma, auto, and financial stocks.
JPMorgan CEO Jamie Dimon offered a sobering assessment amid the volatility, warning of "considerable turbulence" ahead despite his bank's strong quarterly profits. He specifically predicted a Treasury market "kerfuffle" that would necessitate Federal Reserve intervention – a concern echoed by the Boston Fed's Susan Collins, who confirmed the Fed stands "absolutely ready" to stabilize markets "with various tools if conditions become disorderly."
The actual economic damage from these tariff threats remains unclear, but UBS has already cut its FY26 GDP forecast for India to 6% from 6.3%, projecting a 20 basis point hit from Trump's tariffs. Meanwhile, the UN Trade Agency warned tariffs could shrink global trade by up to 7% and reduce global GDP by 0.7%, potentially hurting developing nations more than aid cuts.
Bond market tremors signal deeper concerns
The US bond market experienced its most significant sell-off in decades, with Treasury yields posting their largest weekly increase since the 1980s. The benchmark 10-year yield jumped from 4.01% to as high as 4.58%, defying the typical "risk-off" behavior where investors rush to bonds during uncertainty. This unusual reaction has experts worried about a potential crisis of confidence in US debt instruments.
What makes this particularly concerning is the counterintuitive nature of the sell-off. Historically, US Treasuries have served as the ultimate safe haven during financial turmoil. Yet investors were selling rather than buying despite heightened economic uncertainty – suggesting fundamental concerns about America's fiscal position and the dollar's reserve currency status.
The implications extend far beyond bond traders. Rising yields translate directly to higher borrowing costs for consumers and businesses, with potential ripple effects through mortgages, auto loans, and corporate debt. As Brian Rehling of Wells Fargo noted, corporations will likely pass these costs to consumers, potentially triggering job cuts and broader economic strain.
Market analysts are increasingly worried about potential structural issues in the bond market itself. Some suggest highly leveraged hedge fund positions are exacerbating volatility, while others see this as a deeper questioning of America's financial stability given its ballooning national debt and ongoing fiscal deficits. If confidence continues eroding, as George Cipolloni warned, the consequences could extend well beyond interest rates to the very foundations of global finance.
Dollar slides as gold hits all-time highs
The dollar experienced a dramatic decline, falling below the psychologically important 100 level for the first time since July 2023. This unexpected weakness came as investors increasingly questioned the dollar's status as the world's primary reserve currency amid escalating trade tensions and mounting U.S. debt concerns.
The dollar's slide was comprehensive across major currencies. It reached a decade low against the Swiss franc and a three-year low against the euro, which climbed to $1.1473. The Japanese yen strengthened 1.6% to 142.18 per dollar. This broad retreat signals a potential inflection point in global currency markets, with Christopher Wong of Oversea-Chinese Banking Corp noting that "dollar confidence is under threat" due to "fading marks of U.S. exceptionalism."
As the dollar weakened, gold emerged as the primary beneficiary, surging above $3,200 per ounce to reach unprecedented levels. In India, gold prices skyrocketed by ₹6,250 to breach the ₹96,000 per 10 grams mark. Silver followed suit, rising by ₹2,300 to ₹95,500 per kg. This flight to the traditional safe haven reflects profound anxiety about both geopolitical stability and the reliability of fiat currencies.
The concurrent dollar weakness and gold strength illustrate a significant shift in global financial sentiment, with increasing diversification away from dollar-denominated assets. For India, this translated into a recovering rupee, which strengthened to ₹86.04/$1 after experiencing its worst week in two months. The longer-term implications remain uncertain, but the dollar's decline suggests a potential realignment of global financial power that could reshape investment strategies and currency relationships for years to come.
Warren Buffett doubles down on Japan while others retreat
While most investors were fleeing market turbulence, Warren Buffett was quietly doubling down on his Japanese investments. The Berkshire Hathaway chairman issued a substantial 90 billion yen ($628 million) samurai bond just as other investors were pulling back from the Japanese market. This contrarian move, spanning six tranches with maturities ranging from 3 to 30 years, demonstrates Buffett's extraordinary conviction in Japan's long-term prospects.
Buffett's strategy illuminates his investment philosophy on multiple levels. First, he's securing low-cost financing (around 0.5% for 10-year borrowing) to fund potential future investments. Second, he's leveraging this cheap debt to increase his stakes in Japan's five largest trading houses (Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo), which Berkshire has been steadily accumulating since 2020 with yields estimated at 5%. This creates a substantial spread between borrowing costs and equity returns.
The timing is particularly striking as these trading houses are currently experiencing price pullbacks—Mitsubishi down 5%, Marubeni and Sumitomo down 7%, Itochu down 16%, and Mitsui down 20%—presenting what Buffett clearly views as attractive buying opportunities. Berkshire has already invested $13.8 billion in these companies and recently received regulatory approval to increase ownership above 10%.
This move exemplifies Buffett's core investment principles: investing with a multi-decade horizon (he and successor Greg Abel view this as a commitment spanning "generations"), exploiting temporary market dislocations, and remaining steadfastly contrarian when others panic. As Charlie Munger once described this Japan strategy, it represents an "opportunity to invest large sums of money at better returns than we could get in the United States."
India-US trade relationship navigates tensions
Despite the brief reprieve from Trump's tariff pause, India-US trade relations remain on uncertain ground. Commerce Minister Piyush Goyal captured the mood succinctly, stating that "India doesn't negotiate deals at gunpoint," even as officials confirmed ongoing engagement with US counterparts. The 90-day window provides breathing room, but analysts caution against assuming this represents a permanent solution.
Behind the scenes, substantive diplomatic work appears underway. Reports suggest US Vice President JD Vance may soon visit India for further trade talks, with additional visits by Indian officials also expected. While forming a comprehensive bilateral trade agreement within the 90-day timeframe appears unlikely, sources indicate the "form and shape" of such an agreement could be established within this period.
The Indian government has clearly recognized both opportunities and risks in the current environment. Finance Ministry sources confirmed India remains "on track" to achieve projected GDP growth for FY25 and FY26 despite global challenges, with various departments maintaining "constant touch" with US administration officials. Simultaneously, customs authorities have been instructed to monitor for any "extraordinary surge" in exports or imports to ensure India isn't used for trade diversion by other countries seeking to circumvent tariffs.
For specific sectors, the implications vary significantly. Export-oriented industries like shrimp, textiles, and jewelry gain temporary relief from the pause, while auto components manufacturers see potential market opportunities in the US as Chinese competitors face 125% tariffs. The government has also launched a dedicated "Global Tariff and Trade Helpdesk" to assist stakeholders in navigating these complex trade issues, reflecting recognition of both the challenges and strategic opportunities presented by the current global trade realignment.
TCS Q4 results signal IT sector headwinds
TCS kicked off the earnings season with results that highlighted mounting pressures in the IT sector. The company reported quarterly revenue of ₹64,479 crore (up 5.29% YoY) but saw net profit decline 1.68% to ₹12,224 crore compared to the previous year. More concerning was the company's decision to defer annual wage hikes, typically implemented in April, citing business uncertainties stemming from global economic conditions and tariff-related decision-making delays.
CEO K. Krithivasan offered a mixed outlook, noting that "many customers are in wait-and-watch mode, waiting for the end game on tariffs." He classified 30-40% of TCS's work as "discretionary" – precisely the category most vulnerable to postponement in uncertain times. Despite these challenges, he maintained that "FY25 has been better than FY24 as promised" and expressed confidence that "FY26 will also be better than FY25."
Several operational metrics raised concerns. Employee attrition increased to 13.3%, while the company's EBIT margin declined 30 basis points sequentially to 24.2%. Management attributed this to "tactical interventions, investments, and increased other expenses." On the positive side, TCS reported a robust order book of $12.2 billion, with the North American order book reaching a record $6.8 billion despite current macroeconomic anxieties.
Brokerage reactions were mixed but trended negative, with most cutting target prices. Kotak maintained a Buy but reduced its target from ₹3,900 to ₹3,800, while Nomura kept its Neutral rating but slashed its target from ₹3,890 to ₹3,490. Citi was the most bearish, maintaining a Sell rating and cutting its target from ₹3,210 to ₹3,000. The broader industry implications are significant, suggesting Indian IT firms face an extended period of cautious client spending and decision-making delays across key global markets.
RBI boosts banking system liquidity with massive operations
The Reserve Bank of India announced significant measures to enhance banking system liquidity through open market operations (OMOs) and variable rate repos (VRRs). The central bank plans to execute an OMO purchase of ₹40,000 crore alongside a substantial 43-day VRR operation valued at ₹1.5 lakh crore, with initial auctions scheduled for April 17. Two additional OMOs of ₹20,000 crore each will follow on April 22 and April 29.
These operations aim to achieve a liquidity surplus of approximately 1% of banks' net demand and time liabilities (NDTL), which serves as a crucial measure for assessing banking system liquidity. RBI Governor Sanjay Malhotra emphasized the central bank's commitment to maintaining sufficient liquidity for effective policy rate transmission into market interest rates.
The timing is strategic, designed to counterbalance anticipated Goods and Services Tax (GST) outflows of approximately ₹1 lakh crore, which typically occur around the 20th of each month. The banking system has already seen a remarkable recovery, shifting from a deficit of ₹3 lakh crore in January to a surplus of around ₹1.7 lakh crore in April.
This substantial liquidity injection comes amid broader monetary easing, with the RBI recently reducing its policy repo rate from 6.25% to 6%. Indian Overseas Bank was among the first to pass these benefits to customers, announcing a 25 basis point cut in its repo-linked lending rate (RLLR) from 9.10% to 8.85%, effective April 12. These coordinated measures reflect the RBI's proactive approach to supporting economic growth while managing the complex interplay between domestic banking needs and global economic pressures.
UPI system experiences significant outage amid rising usage
India's Unified Payments Interface (UPI) experienced a significant outage on April 12, the third such disruption within a month, highlighting persistent technical issues in the country's critical digital payment infrastructure. Users of popular services including Google Pay, PhonePe, and Paytm reported widespread transaction failures, with peak complaints reaching over 2,300 on Down Detector, a service that tracks outage reports.
The National Payments Corporation of India (NPCI), which oversees UPI operations, acknowledged "intermittent technical issues" leading to partial transaction declines. According to user reports, 79% experienced payment issues, 19% faced fund transfer problems, and 2% encountered purchase complications. This latest incident follows similar disruptions on April 2 and March 26, the latter affecting over 3,000 users for two to three hours.
These recurring outages raise pressing concerns about the reliability of India's digital payment ecosystem, which has become integral to daily financial activities for millions of citizens. Previous incidents were attributed to fluctuations in bank transaction success rates, which delayed responses over the UPI network, but the frequency of these failures suggests potential deeper infrastructural challenges.
The timing is particularly problematic as UPI has rapidly become the backbone of India's cashless economy, with transaction volumes consistently setting new records each month. As digital payments increasingly replace cash transactions across urban and rural India, ensuring the robustness and reliability of this critical financial technology infrastructure becomes not just a convenience issue but a matter of economic stability and public trust.
FMCG sector braces for subdued growth amid inflation concerns
India's Fast-Moving Consumer Goods (FMCG) sector is projected to experience modest revenue growth of approximately 5% in the fourth quarter of fiscal year 2024-25, according to a BNP Paribas report. This represents an improvement from the 4% growth seen in Q3 but remains significantly below earlier expectations, primarily due to persistent inflationary pressures and weak urban consumption.
The report reveals a challenging outlook, with earnings estimates for FY26 being downgraded for eight out of ten surveyed companies. Only Godrej Consumer Products and Emami escaped these downward revisions. Margins are expected to remain nearly flat as companies grapple with high commodity costs, even as they benefit slightly from easing prices for palm oil and tea quarter-on-quarter.
A notable dichotomy exists between rural and urban markets. Rural consumption has shown signs of recovery, supported by favorable agricultural conditions, improved food prices, and positive monsoon forecasts. In contrast, urban mass consumption continues to decelerate, creating an uneven growth environment across consumer segments.
Looking ahead to FY26, the sector may see improved performance with revenue growth potentially reaching 6-8%. This more optimistic outlook is predicated on a favorable base effect, decreasing crude oil prices, and continued rural consumption recovery. Companies focusing on discretionary segments, such as Titan and Jubilant Foods, are projected to outperform the broader FMCG sector despite the challenging environment, highlighting the importance of strategic positioning in a constrained consumer spending landscape.
Crypto markets stabilize amid global uncertainty
Bitcoin demonstrated remarkable resilience this week, maintaining stability in the $75,000 to $85,000 range despite extreme market volatility triggered by Trump's tariff policies. Currently settling around $80,000, Bitcoin's stability amid broader market turmoil represents a noteworthy development in its maturation as an asset class.
Several factors contributed to this relative stability. Large Bitcoin holders—commonly known as "whales"—showed increased activity, with addresses holding between 1,000 to 10,000 BTC actively accumulating. One notable transaction involved a whale moving 1,050 BTC valued at over $90 million, widely interpreted as a bullish signal. This institutional confidence provided crucial support during a period when traditional markets experienced significant swings.
Macroeconomic factors also played a supportive role. Long-term U.S. Treasury yields fell to six-month lows, creating an environment conducive for capital flows into alternative assets like cryptocurrencies. Additionally, the declining dollar index enhanced Bitcoin's appeal as a potential hedge against inflation, particularly as CPI data came in lower than expected.
The market did see notable variations in performance across different cryptocurrencies. Among the top gainers were Hyperliquid (+27.84%), OKB (+12.7%), and Render (+11.97%), while NEAR Protocol (-20.77%), Troncoin (-17.75%), and Filecoin (-16.02%) experienced significant losses. These divergent performances highlight the increasingly nuanced nature of the cryptocurrency ecosystem, where market movements are no longer monolithic but reflect specific factors affecting individual projects and tokens.
Strong Q1 results from US banks defy economic concerns
Major US banks reported surprisingly strong first-quarter earnings, defying broader economic anxieties. JPMorgan Chase led the pack with record stock trading revenue of $3.81 billion, marking a 48% increase driven by market volatility. The bank's quarterly profits rose 9% to $14.6 billion, with total revenues reaching $45.3 billion, up 8% from the previous year. Morgan Stanley similarly exceeded expectations with a profit of $4.3 billion ($2.60 per share), significantly up from $3.4 billion ($2.02 per share) last year, while total revenue reached $17.7 billion compared to $15.1 billion year-on-year.
These robust results, however, came with cautionary notes from leadership. JPMorgan CEO Jamie Dimon warned of "considerable turbulence" facing the economy, highlighting heightened geopolitical risks, high fiscal deficits, and volatile asset prices. The bank increased its loan loss provisions to $973 million—significantly above analysts' estimates of $290 million—suggesting concerns about potential economic deterioration. Wells Fargo, which reported a 6% profit increase to $4.89 billion, similarly cautioned that U.S. tariffs could dampen economic growth and potentially push the economy into recession.
The earnings reports revealed significant strengths in equity trading and wealth management, with Morgan Stanley's investment banking revenue rising 8%. JPMorgan's equity markets revenue surged by 48%, driven largely by robust activity in derivatives during high volatility periods. This performance demonstrates how market turbulence, while problematic for many sectors, can actually benefit certain financial services divisions.
Market reactions to these results were mixed, with JPMorgan shares rising 3.9% in early trading despite having declined 5.3% for the year before the announcement. Morgan Stanley's stock was less favored, declining 0.2%, while Wells Fargo dropped 3%. These varying responses highlight investor uncertainty about whether the banks' strong performance can be sustained amid ongoing economic headwinds and the potential long-term implications of trade conflicts.
RBI draft gold loan norms signal tighter regulations for NBFCs
The Reserve Bank of India's new draft guidelines on gold loans have significant implications for non-banking financial companies (NBFCs), particularly those heavily focused on gold lending like Muthoot Finance and Manappuram. The proposed regulations tighten the definition of loan-to-value (LTV) ratios, requiring that the 75% LTV cap be maintained throughout the loan's lifetime, failing which penalties would apply. While this rule already exists for banks, it represents a new restriction for NBFCs and could materially impact their growth prospects.
Brokerage reactions highlight varying interpretations of the severity of these changes. Morgan Stanley notes that while the revised LTV definition for bullet loans could affect growth, this might be offset by the countercyclical nature of the gold loan segment during economic uncertainty. Kotak Institutional Equities took a more cautious view, downgrading Muthoot Finance from Buy to Add and cutting its target price from ₹2,400 to ₹2,250, while reducing estimates by 10%.
Not all aspects of the draft guidelines were as restrictive as feared. The regulations do not mandate monthly interest servicing, and bullet loans can be rolled over once interest is paid at maturity—more favorable outcomes than some analysts had anticipated. Additionally, income generation loans will no longer need to be classified as gold loans but rather according to their business use, which provides some operational flexibility.
The immediate market response saw Muthoot's stock under pressure, though Manappuram's position appears somewhat stronger given Bain's recent open offer price. Bernstein maintained an Outperform rating on Muthoot with a target price of ₹2,500, suggesting the impact of the draft norms would be "potentially offset by rising gold prices." Given gold's current record levels, this mitigating factor could prove significant in moderating the regulatory impact on these specialized lenders.
quick snippets and conclusion
• Midcap Stock Potential: Analysts project major gains for select midcap stocks, with Dixon Technologies (40% upside), PI Industries (23%), ACC (38%), and Aurobindo Pharma (39%) among those with strong ratings and substantial upside potential.
• TCS Leadership Changes: TCS appointed Aarthi Subramanian as President and Chief Operating Officer. Previously serving as Tata Group Chief Digital Officer, she'll now drive growth alongside newly appointed Deputy CEO KP Mohanakrishnan.
• NBCC Real Estate Success: NBCC sold approximately 560 residential units at Aspire Leisure Park in Greater Noida for ₹1,153.13 crore, following an earlier sale of 1,185 units at Aspire Dream Valley for ₹1,504.7 crore.
• Pharma Export Surge: Indian CDMO pharma players showed strong export growth, with Divi's Labs exports reaching $85 million (up 22% YoY) and Laurus Labs at $53 million (up 18% YoY) with Q4 exports jumping 60% YoY.
• Automotive Strategy Report: NITI Aayog published a report outlining India's potential to become a key player in the global automotive supply chain, recommending operational support, capital expenditure backing, cluster development, and R&D investments to help the sector grow from its current 3% global market share.
• V-Mart Milestone: V-Mart Retail reached a significant milestone with the opening of its 500th store, now operating in over 300 cities with 43 lakh square feet of retail space across the V-Mart, Unlimited, and LimeRoad.com brands.
• Market Holidays: The Indian stock market will have only three trading days (April 15-17) in the coming week, with closures on April 14 (Dr. B.R. Ambedkar Jayanti) and April 18 (Good Friday) affecting all market segments.
• NSE Investor Growth: The NSE announced total investor accounts have surpassed 22 crore, with unique registered investors standing at 11.3 crore as of March 31, 2025, showing significant growth from the 20 crore mark reached in October 2024.
• MF SIP Concerns: Equity mutual fund inflows decreased to a 11-month low in March, with SIP contributions falling to ₹25,926 crore and a concerning 51 lakh SIP folios being closed, suggesting investor caution amid volatile markets.
The financial week ahead will likely continue to be dominated by tariff tensions and economic fallout, while corporate earnings will provide crucial clarity on how various sectors are navigating these uncertain waters. Investors would be wise to maintain diversification, particularly given the accelerating pace of de-dollarization and the ongoing realignment of global trade relationships.