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Informist, Monday, Apr. 7, 2025

By Gopika Balasubramanium

MUMBAI – Analysts are divided on the direction benchmark indices will take Tuesday, with some expecting a bounce back while others expecting them to take cues from global markets. The heightened fear of a possible recession in the US has hit sentiment and investors expect any retaliation by other countries against the US would disrupt global growth, analysts said.

An analyst said one needs to keep a watch on the movements in the currency market, and if China decides to devalue the yuan against the US, there would be complications globally. The India VIX, the fear gauge of domestic equities, jumped over 65% and ended at 22.79, its highest level since Jun. 4. 

The three-day monetary policy meeting of the Reserve Bank of India began Monday. Analysts expect the RBI to cut interest rate by 25 basis points in this policy meeting. Several global brokerages expect the RBI to make three cuts in 2025.

High tariffs announced by the US and retaliatory tariffs by China are likely to impact global GDP growth and some economies might go into recession, Ashutosh Tiwari, managing director and head of institutional equities at Equirus Capital said in a note. The uncertainties around global trade and growth are likely to keep global markets, including India, choppy in the near term, Tiwari said.

While information technology companies are not directly impacted by tariffs, a recession will impact their growth, he said. Despite the fall in IT stocks, these are still trading at one-year forward price-to-earnings valuations which are 15% higher than pre-COVID and hence investors should be underweight on IT, he said. The Nifty IT has already fallen over 11% since the 26% reciprocal tariffs on Indian exports to the US were announced by US President Donald Trump.

Other than IT, metal and pharmaceutical stocks will also be under pressure in the near term, analysts said. The Nifty Metal has fallen 13% and has been the worst performing index since Thursday. Analysts said a recession in the US and the current trade war, which threatens a fall in demand from China, could bring the prices of steel down globally. This would have a significant impact on Indian steel makers such as Tata Steel and JSW Steel, analysts said.  

The Nifty 50 closed at 22161.60 points, down 3.2%, and the BSE Sensex closed at 73137.90 points, down 3.0%. Both indices ended off their intra-day lows. Banking and financial services stocks were the biggest drag on the Nifty 50. All stocks except Hindustan Unilever ended in the red.

"The overall trend for the Nifty 50 is weak, and the indices will likely move in tandem with the global markets as uncertainties are at peak," Nandish Shah, senior technical and derivatives analyst at HDFC Securities, said. He expects the Nifty 50 to find support at 21950 and face resistance at 22700 points.  End

US$1 = INR 85.84

Edited by Deepshikha Bhardwaj

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