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Informist, Tuesday, Mar. 4, 2025

By Akshita Kumar

MUMBAI – Analysts expect the headline indices to slip further Wednesday amid the risk of US tariffs affecting global economic growth and the continued selling by foreign portfolio investors. US tariffs could lead to inflation in the US, which would make it difficult for the US Federal Reserve to cut interest rates, analysts said.

"The uncertainty surrounding tariffs is high, which is impacting the domestic market," said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services. There may be a clash between the Fed and President Donald Trump on whether to cut or raise interest rates, Vijayakumar said. Asked about stock valuations in India, he said these are fair now but still not cheap.

Narendra Solanki, head of fundamental research, investment services, at Anand Rathi Share & Stock Brokers, said foreign investors are taking money out of high-risk assets in emerging markets such as India and investing in low-risk assets such as government securities in the US.

Considering the recent decline in indices, IDBI Capital Markets & Securities said in its strategy report that valuations of large-cap companies have now reached more reasonable levels, though the mid-cap and small-cap stocks may still face challenges despite their recent drop. For now, the brokerage expects volatility in March to continue due to the prevailing global economic uncertainty, lack of major positive triggers for the domestic market, and a possiblity of more selling by FPIs.

The brokerage expects earnings to improve gradually but sees a major risk from direct tariffs on India by the US. Considering this, several analysts have said the Nifty 50's valuations might come down further. The Nifty 50's price-to-earnings ratio, based on one-year forward earnings per share, is almost at its 10-year mean of 18, IDBI Capital said.

Kotak Institutional Equities is among the brokerages that said valuations are not favourable despite the sharp correction in the market. "We do not find much value in the market despite the severe market correction. Most parts of the market are expensive on an absolute basis or on a historical basis...," Kotak Equities said in a report.

Tuesday, the Nifty 50 ended at 22082.65 points, down 36.65 points or 0.2%. The BSE Sensex ended at 72989.93 points, down 96.01 points or 0.1%. The immediate support for the 50-stock index is seen at 21800 points for the next two weeks, Mugilan K., technical analyst at Cholamandalam Securities, said. The resistance is seen at 22250-22800 points, he said.

Tuesday, the broader market indices ended mixed. Small-cap indices ended up 0.6-1.2%, and the Nifty Midcap 100 and Midcap 150 ended slightly higher, but the Nifty Midcap 50 ended down 0.1%. The support for Nifty Midcap 100 index is pegged at 45000 points and the resistance is seen at 50000 points for the next two weeks, Mugilan said.

Analysts said chemical companies may see higher exports to the US with companies seeking alternatives after the US imposed tariffs on China. The US is already the largest importer of chemicals from India, with exports to the US valued at $2.9 billion in the financial year 2023-24 (Apr-Mar), brokerage Prabhudas Lilladher said in a report.

Among specific stocks, shares of GE Vernova T&D will be in focus Wednesday. After market hours Tuesday, the company said it had received three orders worth a cumulative INR 5 billion from Power Grid Corp. of India.  End

Edited by Rajeev Pai

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