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Informist, Wednesday, Mar. 26, 2025

By Gopika Balasubramanium

MUMBAI – Benchmark equity indices are expected to trade in a thin range on Thursday, ahead of the monthly expiry of the March derivatives series of the Nifty 50. Analysts said the imposition of tariffs on US imports would be a key focus for the rest of the week. Officials from India and the US are holding trade talks ahead of reciprocal tariffs set to take effect on Apr. 2. The trade negotiations in Delhi are expected to conclude by Saturday.

On Tuesday, media reports quoting government sources said India is willing to cut tariffs on over half of the $23 billion worth of US imports as part of the first phase of deals between the two countries. Earlier this week, both the Indian commerce ministry and the US embassy had said US officials would be in India until Saturday to discuss details of the proposed multi-sectoral bilateral trade agreement.

US President Donald Trump, upon returning to the White House on Jan. 20, had announced plans to bring down the trade deficits of his country with key trading partners such as Mexico, Canada, and China. To achieve this, Trump imposed additional tariffs on all three partners--a 25% additional tariff on imports from Canada and Mexico, and a 20% tariff on Chinese goods in early February. He also said that he would levy reciprocal tariffs on countries that have been charging much higher import duties for US exports.

India had a trade deficit of $45.7 billion with the US in 2024, according to data on the US Trade Representative website. Agricultural products, pharmaceuticals, automobiles, and jewellery are likely to face US tariffs, analysts said. However, there is a high probability that trade negotiations will end in favour of India, the head of research at a domestic brokerage said. Indian officials are likely to strike a deal where both countries can go forward without complexities with respect to the trade policies, he said. Tariff on exports to the US is definite, but the quantum may be less severe than expected, as the US is likely to agree on an average tariff rather than product-by-product duties, he said.

When asked about the impact of potential tariffs on pharmaceutical companies, he said that as the US is highly dependent on India for its generic drug requirements, it may take a similar stance as it did with oil imports from Canada. Oil imports from Canada attracted only 10% tariffs, while all other goods attracted 25%. Similarly, the levy of tariffs on pharma products is likely to be less, he said. According to him, it would be difficult for the US to change the vendor immediately and even tougher to start manufacturing from scratch to avoid dependence on India. Also, exorbitant increase in tariffs would lead to inflation further worsening the situation, and higher inflation would lead to delay in interest rate cuts, he said.

The US Federal Reserve had on Thursday held the federal funds rate steady at 4.25-4.5% after its two-day policy meeting. The Fed had also cut down its growth forecast and raised inflation estimates, citing uncertainties around Trump's administration.

Back home, the Reserve Bank of India is expected to cut key interest rates by 25 basis points at its policy meeting in the first week of April. A rate cut by the RBI is definitely on the cards, the head of research quoted earlier said. He attributed the recent rally in the markets to the expectation of rate cuts, foreign investors turning to Indian markets, and the appreciation of the Indian rupee.

On Wednesday, the Nifty 50 closed at 23486.85 points, down 0.8%, and the BSE Sensex closed at 77288.50 points, down 0.9%. Broader market indices also ended lower, with mid- and small-cap indices closing nearly 1% lower. Most sectoral indices ended lower, except for the Nifty Auto, which closed with marginal gains.

Market participants booked profits ahead of the expiry of the March derivatives contract on Thursday, while concerns around tariff discussions continue to weigh on sentiment, Ajit Mishra, senior vice-president – technical research at Religare Broking, said. On the technical front, the Nifty 50 is approaching its key support at 23400 points, he said. A decisive hold at this level could trigger the next leg of the uptrend; otherwise, the consolidation phase may persist, Mishra said.

Echoing similar views, Rupak De, senior technical analyst at LKP Securities, said in a note that support for the Nifty 50 is seen at 23300 points, up to which the current decline might extend. However, any fall below 23300 points might raise questions about the recent sharp rally from 21964 points, he said. He expects the Nifty 50 to face resistance at 23550 points, above which sentiment might improve.  End

US$1 = INR 85.71

Edited by Subhojit Sarkar

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