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Informist, Wednesday, Feb. 19, 2025

By Anjana Therese Antony

MUMBAI – The Indian equity market closed slightly lower Wednesday after a tug-of-war between bulls and bears as US President Donald Trump announced likely new tariffs. The uncertainty about US tariff policy has been a double whammy for domestic equities, which have been hampered by expensive valuations, a slowdown in earnings growth, and sharp foreign outflows.

"I am not sure where the market will go. It (direction) looks uncertain, and stocks may continue to see selling pressure, possibly 3-4% more in the near term, given the uncertainty from the US," a research analyst at a domestic broking firm said. 

After swinging between gains and losses, benchmark indices ended in the red, down for the second consecutive session after it snapped an eight-day losing streak on Monday. The Nifty 50 ended 12.40 points or lower 0.1% at 22932.90 points, and the BSE Sensex closed 28.21 points lower at 75939.18 points. The 22800 level remains a key support for the 50-stock index. Though the level has been breached three times intra-day in February, it has managed to close above the level. 

On Tuesday, Trump announced that the US will impose a 25% tariff on imports of automobiles, semiconductors and pharmaceuticals, leading to a sell-off in most Asian and European markets Wednesday. This also has deepened the worries of a potential spike in US inflation, which may lead to a slowdown in interest rate cuts by the US Federal Reserve, analysts said. 

India's gross exports to the US are around 2% of GDP, Goldman Sachs said in its report Tuesday. "We estimate a potential GDP growth impact of 0.1-0.3 pp (percentage points) under different scenarios of increase in average US effective tariff rate on Indian exports and price elasticity estimates," it said. 

Investors are also concerned about the sharp depreciation in the Indian rupee, which fell to a record low of 87.95 per dollar last week from 83.79 at the end of September before the selling pressure started in the domestic market. The Indian rupee, which had consistently remained insulated from sharp depreciation in 2024, saw sharp dips to fresh lows amid a strengthening dollar, SBI Capital Markets said in a report. Foreign portfolio flows so far in the current financial year have fallen sharply with huge outflow from equity barely offsetting the inflows from bond index inclusion, it said. 

Information technology, pharma, and automobiles were among the worst-hit sectors in the Indian market. Losses in the IT stock--which has the second-highest weightage of 14.1% in the Nifty 50--weighed the most on the index. Worries persist about a potential rise in US inflation amid new tariffs and retaliatory measures. This could dent the positive sentiment towards IT companies, which are expecting the March quarter to show better financial performance, supported by higher discretionary spending and better demand.

Trump's 25% tariff threat on pharma imports weighed down the domestic sector. Many Indian pharma players have generics business in the US and earns a significant part of their revenue from the world's largest economy. Shares of Natco Pharma and Zydus Lifesciences hit one-year lows on the National Stock Exchange. The Nifty Pharma was the third-worst hit sectoral index and closed 0.7% lower. 

For most automobile companies, the likely new tariffs are expected to have minimal impact, some analysts said. Most stocks in the sector, which are part of the Nifty 500 index, closed slightly in the green. The Nifty Auto closed at a 10-month low of 21809.15 points, down for the eighth straight session. Eicher Motors and Ashok Leyland were the top gainers in the auto index.

On specific stocks, Rail Vikas Nigam closed 13% higher at INR 376.85 on the National Stock Exchange after the company said its joint venture with Rithwik Projects got a INR 5.54-bln order from Rail Infrastructure Development Co. (Karnataka). JBM Auto extended intra-day gains and surged to close 14.3% higher at INR 647.60 after the company's subsidiary got INR 55-bln order under a government scheme. Hexaware Technologies, which was listed on Wednesday, closed 7.7% higher at INR 762.55 after listing at ab 5% premium to the issue price. 

* Of the Nifty 50 stocks, 25 rose and 25 fell

* Of the Sensex stocks, 11 rose and 19 fell

* On the NSE, 2,145 stocks rose, 716 fell, and 66 were unchanged

* On the BSE, 2,810 stocks rose, 1,147 fell, and 117 were unchanged

* Nifty IT: down 1.3%; Nifty Pharma: down 0.7%; Nifty Realty: up 1.7%

BSE                                               NSE

Sensex: 75939.18, down 28.21 points or 0.04%      Nifty 50: 22932.90, down 12.40 points or 0.05%

End

Edited by Saji George Titus

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