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Informist, Thursday, Apr. 3, 2025

By Gopika Balsubramanium

MUMBAI – Headline indices are expected to move in a range on Friday, with gains likely to be limited as investors may refrain from taking big bets before assessing the full impact of the US tariffs and also before the March quarter earnings season kicks in next week.

Equity markets in Asia and Europe saw large outflows on Thursday following the US announcement of reciprocal tariffs, but the decline in the domestic market was relatively limited. Domestic investors remain hopeful that the ongoing bilateral trade talks between the US and India could offer some relief from the recent tariff, market analysts said.

In the near term, the market is likely to stay range-bound, according to the head of research at a domestic brokerage. He also noted that the downside appears limited, citing signs of a recovery in the Indian economy. March's manufacturing purchasing managers' index showed robust growth, the goods and services tax collections hit a nine-month high, and government and RBI measures are expected to boost urban demand.

Considering this, he said the market is unlikely to take extreme jumps on either side, but stocks may fall if there is certainty that the US is reaching a stagflation-like situation catalysed by its own tariff actions.  

On the earnings front, he said March quarter would definitely be better than the past three quarters. The market will likely look at the management comments on growth outlook and guidance for 2025-26 (Apr-Mar), he said. 

On Thursday, the Nifty 50 ended at 23250.10 points, down 82.25 points or 0.4%, and the BSE Sensex closed at 76295.36 points, down 322.08 points or 0.4%. The Nifty 50 is expected to find support at 23100 points and face resistance at 23500 points, a research analyst at Axis Securities said.

The possibility of a bilateral trade agreement with the US suggests that Washington may eventually lower tariffs on India, Barclays said in a report. India and the US have been working on a bilateral trade agreement for over a month now, with media reports saying that the 'terms of reference' have already been finalised.

"We believe India is likely to take a conciliatory approach to tariffs and is likely to be willing to negotiate to reduce tariffs on a number of product categories while also easing some market access barriers," Barclays said. "Some tariffs have already been reduced, most notably in the Union Budget presented on Feb. 1. That said, some categories, including dairy and agriculture, could prove more politically difficult for the Indian government to concede on."

Midnight Thursday, US President Donald Trump levied reciprocal tariffs across countries, with Indian imports attracting a 27% adjusted reciprocal tariffs. Following the announcement, there has been a sell-off in the equity markets around the globe, as investors digested the potential hit these duties can have on the respective economies, supply chain complications, tariff-induced increase in costs, and ultimately, on the profitability of companies. 

Meanwhile, Morgan Stanley sees a downside risk of 30-60 basis points to its India GDP growth estimate of 6.5% in 2025-26 (Apr-Mar) on account of US imposing reciprocal tariffs on India. "We see downside risks to growth from both direct and indirect channels," the investment bank said in a report. While the tariffs exceeded its estimates for India, they remained in line with or lower than those for other key competing economies. Hence, Morgan Stanley expects the direct impact to be limited, as exports to the US account for only 2.1% of India's GDP, or 1.7%, excluding energy and pharmaceuticals, which are exempt from the hikes. However, weaker US growth and sluggish global trade could hurt external demand, the report said.

Separately, investors will also look at the comments by the Reserve Bank of India on whether these tariffs may have any potential impact on the inflation or the rupee. The market expects a 25-basis-point rate cut by the central bank after its three-day monetary policy meeting starting Apr. 7. 

Morgan Stanley expects the RBI to shift to an accommodative stance and cut rates by 25 bps in April. Barclays said the tariff imposed on India reinforced its view that the RBI's Monetary Policy Committee may deliver three more repo rate cuts, including one next week, and lower the repo rate to 5.50% from the current 6.25%.

Investors now await the US services purchasing managers' index and the weekly jobless claims data, both due later Thursday. These data points will help investors gauge the health of the US economy as fears of recession still plaguing them.  End

US$1 = INR 85.43

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Subhojit Sarkar

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