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Informist, Thursday, Mar. 27, 2025

By Gopika Balsubramanium

MUMBAI – Benchmark indices shrugged off the weakness in early trade Thursday caused by the latest US auto tariffs and managed to close higher, which some research analysts attributed to short covering. The sentiment has also improved as foreign investors are showing interest towards Indian equities, which is evident as they turned net buyers in the last few sessions, even when domestic investors offloaded shares. The domestic market outperformed most of its global peers, where the latter plunged on the new US import tariffs on auto and auto parts.

Overnight, US President Donald Trump announced 25% import tariffs on automobiles, which will be effective from Apr. 3, and tariffs of similar quantum for auto parts which will likely take effect before May 3. Meanwhile, some analysts said the Indian market has factored in the US tariff-related shocks and that the current momentum is likely to continue. Some analysts believe that the new levies could dent Indian equities in the short-term, the impact would not be as severe from a broader perspective. Indian and US representatives are on a bilateral trade talks in the national capital since Tuesday. The negotiations are likely to continue till Saturday. 

Even though domestic indices showed strength, shares of some auto as well as part makers fell sharply. The fall in auto stocks limited the rise of the Nifty 50 by 0.1%. However, gains in banks and financial services stocks pushed the 50-stock index higher by nearly 0.3%.

The Nifty 50 closed at 23591.95 points, up 105.10 points, or 0.5% and the BSE Sensex closed at 77606.43 points, up 317.93 points, or 0.4%. Broader indices also gained momentum and closed higher. Barring Nifty Auto, Nifty Pharma, and Nifty Healthcare, all other sectoral closed higher. India VIX, the volatility gauge, also showed ease in nervousness in the market and closed 1.3% lower at 13.3000.

Coming back to auto stocks, Tata Motors was the worst-hit Nifty 50 constituent, down 5.6%, ending lower for the third consecutive session. The stock fell 7% intra-day after the 25% import tariff announcement by the US on automobile and auto parts. Some analysts attributed the fall to a panic sell-off by investors, but some said that the latest tariff could have an impact on the business of its subsidiary, Jaguar Land Rover. The US is an important market for JLR as one-third of its sales come from the country. In FY24, JLR sold 94,994 units in North America, which accounts for 22% of total sales of 431,733 units, according to JLR's annual report. 

If JLR had a manufacturing unit in the US, the scenario could have been a bit different, an analyst tracking the automobile sector at a large-sized domestic brokerage said. If the US and UK come into a better arrangement, especially on tariffs, things would improve for JLR, the analyst said. US goods trade surplus with the UK was $11.9 billion in 2024, according to data from the US government's website. It is better to wait and watch as the US' deficit with the UK is not much, the analyst said.

Other auto-related stocks such as Samvardhana Motherson and Sona BLW Precision Forgings closed lower by 2% and 6%, respectively. These companies also 'vulnerable' to tariff-related shocks, as they have a huge market share in the US. The auto analyst said that Samvardhana Motherson is an export-driven company with atleast 20-40% exposure to US. It has manufacturing facilities in Mexico as well, which puts the company in a more difficult place, the analyst said.

Apart from automobile stocks, other sectors that felt the heat of Trump's tariffs were pharmaceuticals. Investors sold shares in a 'panic' expecting a similar import tariffs on pharmaceutical products by the US, Maitri Sheth, research analyst at Choice Broking said. Tariffs are unavoidable but the quantum would likely be less with respect to pharma products as US depends heavily on India for generic drugs, Sheth said. It is also impossible for US to quickly replace India with another as India is one of the the biggest generic drugs player in tandem with China, Sheth said. The companies are confident to absorb some of the tariff-related price inflation on their side and will likely pass it to the customers, she said. 

Shares of Sun Pharmaceutical Industries closed 1.6% lower. J.B. Chemicals & Pharmaceuticals, Ajanta Pharma, and Lupin also ended 2-6% lower. JB Chemicals tumbled after a large deal of 9 million shares took place on the National Stock Exchange took place in early trade Thursday. While the buyer and seller involved in the deal was not known immediately, reports had said that the company's promoter and private equity firm KKR launched a block deal to dilute part of its stake. 

On the other hand, shares of Glenmark Pharmaceuticals closed 4% higher after HSBC Global Research upgraded the stock to 'buy' from 'hold' and raised its target price to INR 1,785 from INR 1,630 earlier. The risk-reward appears favourable for Glenmark Pharma supported by visibility around the expansion of margins for its base business, the broking firm said in a research report.

Trent was among the top gainers in the Nifty 50 and closed nearly 2% higher after Macquarie initiated coverage on the stock with an 'outperform' rating and a target price of INR 7000. Macquarie said the company is leading its Asian peers in terms of growth, return profile, and inventory turns. 

Capri Global Capital ended 15% lower and was the worst hit in the Nifty 500 stock after trading nearly 19% higher in early trade. Out of the last eight trading sessions, the stock closed higher six times, gaining near 4%.

* Of the Nifty 50 stocks, 35 rose and 15 fell 

* Of the Sensex stocks, 20 rose and 10 fell

* On the NSE, 1,382 stocks rose, 1,537 fell, and 59 were unchanged

* On the BSE, 1,699 stocks rose, 2,349 fell, and 84 were unchanged

* Nifty PSU Bank: up 2.5%; Nifty Media: up 1.5%; Nifty Auto: down 1%

BSE                                               NSE

Sensex: 77606.43, up 317.93 points or 0.4%        Nifty 50: 23591.95, up 105.10 points or 0.5%

End

US$1 = INR 85.78

Edited by Deepshikha Bhardwaj

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