Mumbai: The US President Donald Trump’s surprise tariff announcement on Thursday night re-ignited trade tensions between the country and China. US President Donald Trump said that the US is putting 10% tariffs on another $300 billion worth of Chinese goods starting 1 September. To which, China foreign ministry pushed back on Friday.

With that, hopes of a trade truce have taken a backseat and fears of re-escalation of a trade war have resurfaced. As the week came to a close, it was a sea of red across global equity markets. Asian stocks ended Friday’s session in deep red and so did the US-European and equities. Some key Asian indices lost more than 2% during the week.

For some of these markets, internal issues also added to pain. For instance, the ongoing protests in Hong Kong are feared to hurt its economy if remained unresolved for long. The South Korea-Japan trade weighed on their respective market performances. India was not immune to this fall. Weak domestic macro-economic scenario, increased taxation on foreign investors and poor corporate earnings growth hurt investors' confidence.

Mirroring these worries, the fear gauge – volatility index (VIX) spiked as the week ended. VIX is a contrarian sentiment indicator which helps in determining whether there is too much optimism or fear in the market.

As the alongside chart shows, NSE India VIX along with others rose sharply during the week. On a calendar year-to-date basis, the VIX readings for the mentioned equity markets are in the negative - indicating complacency, but for now, equity market investors are gripped by fear.

Meanwhile, sharing views on Indian stocks, analysts at Securities India Pvt. Ltd said, “The sharp slowdown in auto sales, NBFC stress and recent disappointment with the budget has turned the narrative pessimistic amongst investors. The Nifty is down 10% from its peak, and broader markets even more. We have been forecasting earnings disappointments for the last 5 years and continue to do so. However, the likely policy response and potential for 'big-bang' reforms ahead could lift Nifty multiples to 18x 1- year forward PE. Our Nifty base case for December 2019 is 11,000, with upside/downside scenarios of 12,400/9,400."

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