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Informist, Friday, Apr. 4, 2025

By Gopika Balasubramanium

MUMBAI – Benchmark indices are likely to move in a range in the coming week as investors wait for announcement of corporate earnings for the March quarter to start, analysts said. Markets have been shaken globally by concerns over a global trade war following the announcement of import tariffs by US President Donald Trump. Market sentiment is negative due to fears of a possible recession in the US and likely imposition of tariffs on pharmaceutical imports by the US.

Despite the market digesting significant negative news, the technical structure remains promising as long as the Nifty 50 stays above 22500 points, Ajit Nayak, technical and derivatives analyst at HDFC Securities, said. A fall below this level can push the Nifty 50 down to 22000-21500 points, he said. Nayak expects the Nifty 50 to face resistance at 23850 points.

A recession in the US could possibly lead to a 3% cut in earnings per share estimate of the Nifty 50 for 2025-26 (Apr-Mar), Emkay Global Markets Research said in a report. This is due to cuts in the earnings estimates of technology companies as a recession in the US would affect recovery in the sector, the brokerage said. Metal companies, which are large contributors to the estimates of earnings per share for FY26 of the Nifty 50, are also vulnerable due to lower metal prices, the brokerage said.

On Friday, metal stocks were the worst hit, with the Nifty Metal index closing 6.6% lower. Shares of Vedanta, Hindalco Industries, National Aluminium Co., and others will likely be under pressure in the near-term until fears related to global recession fades. Further, there are risks for these companies from cheap steel being dumped into the domestic market by Chinese companies, with China facing severe tariffs from the US. However, to protect the Indian companies, the Directorate General of Trade Remedies had recommended a provisional 12% safeguard duty on imports of certain steel products for 200 days.

Shares of pharmaceutical companies will also be under pressure in the near-term, analysts said. The only situation that could revive these stocks is when India and US agree on a trade deal, they said. India exported about $8 billion of pharma products to US in FY24, and was the largest export destination, according to Crisil Ratings. India supplies 40% of generics consumed in the US, the ratings agency said.

On the other hand, shares of financial services companies could rise in the shorter term as the sector is immune to the global turmoil from the tariffs, and also benefits from the Reserve Bank of India's aggressive moves that have turned liquidity in the system positive, Emkay Global said. However, the brokerage is more bullish on non-banking finance companies than banks as the former benefit more in the short term. 

Market participants are also waiting for the outcome of the RBI's three-day monetary policy meeting that starts Monday. On Friday, economists at Goldman Sachs said they expect the RBI's Monetary Policy Committee to cut interest rates more aggressively this year to counter the growth slowdown at a time of contained inflation. Echoing similar views, Barclays on Thursday said that the RBI may deliver three more repo rate cuts, including one next week, and lower the repo rate to 5.50% from the current 6.25%. Morgan Stanley sees a deeper rate easing cycle with additional cuts of 50-75 bps, beyond its base case of 75 basis points, as the RBI may need to support domestic demand.  End

US$1 = INR 85.23

Edited by Ashish Shirke

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