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Informist, Wednesday, Apr. 9, 2025

By Gopika Balasubramanium

MUMBAI – Benchmark indices may fall Friday as the trade war between China and the US has taken an ugly turn, raising risks of a major slowdown in economic growth globally. China retaliated with a steep 84% tariff against the 104% tariff currently imposed by the US.

As the US and China trade war intensified, global markets fell even more and pointed to a possibility of further decline in Indian stocks, when the market reopens on Friday. Markets in India are shut on Thursday on account of Mahavir Jayanti.

For the weeks ahead, the movement in the headline indices will depend on whether the trading partners of the US respond to the latter's reciprocal tariffs with severe retaliations, and also on how global markets react in such a turbulent time, analysts said. Analysts also said that the outperformance of Indian equities with respect to its global peers is likely to continue in the near term.

Wednesday, the Reserve Bank of India cut the repo rate by 25 basis points to 6%, as widely expected, and changed its stance to 'accommodative' from 'neutral'. Investors looked past the rate cut announcement, which analysts believe is because the market has already factored this in.

Despite the rate cut, sentiment did not improve as tariff threats is seen as a bigger risk. Several brokerage have reduced the growth estimates for India amid this tariff threat and the RBI, in its monetary policy outcome, also cut its GDP growth projection for 2025-26 (Apr-Mar) to 6.5% from 6.7%. "Uncertainty in itself dampens growth by affecting investment and spending decisions of businesses and households.... the dent on global growth due to trade frictions will impede domestic growth," the Reserve Bank of India Governor Sanjay Malhotra said Wednesday, while detailing the monetary policy outcome. 

Analysts also said that the market is unlikely to look at positive triggers from domestic events in the term as the cloud of uncertainty on the US recession and disruptions loom over global trade, which has been in place for decades. That said, investors are likely to shift their attention to the corporate earnings of Indian companies in the coming days.

The March quarter will likely be a disappointment in terms of earnings growth as profits of the companies will not see any sharp rise, analysts said. Echoing similar views, Dhananjay Sinha, co-head of research at Systematrix Institutional Research, said that the earnings growth is unlikely to show any improvement in the March quarter. He also said that the tariff-related risks will likely cause some damage if not major, and may impact economic growth and earnings. He expects the earnings growth of Nifty 50 to be at a modest 5-6% for FY26. 

On Wednesday, the Nifty 50 settled at 22399.15 points, down 136.70 points, or 0.6%, and the BSE Sensex closed at 73847.15 points, down 379.93 points, or 0.5%. Financial services and information technology stocks were the worst performers on the Nifty 50. 

IT stocks will be in focus Friday as Tata Consultancy Services will disclose its earnings for the March quarter Thursday, marking the beginning of the corporate earnings season. For the quarter under review, the consolidated net profit of TCS is expected to rise 1.5% sequentially, while its revenue is expected to grow 1.2%, the average of the estimates of 16 brokerages showed. The muted growth in the company's earnings was likely due to a fall in revenue from the company's key client Bharat Sanchar Nigam, zero changes in client budgets, and furloughs, the brokerages said. The post-earnings press conference of the company is scheduled at 1730 IST on Thursday and a conference call with analysts at 1900 IST. 

Increasing worries of a likely recession in the US have raised doubts about the growth and profitability of Indian IT companies, analysts said. Indian IT companies can be looked at only when there is clarity on the growth of the US economy, analysts said. 

"The underlying trend is negative, but the Indian equities will likely outperform other global indices in the near term," Nandish Shah, senior technical and derivatives analyst, said. He expects indices to be in range on Friday with the investors' focus on TCS earnings. Shah expects Nifty 50 to find support at 22000 points and face resistance at 22857 points. He said that the volatility in the market is likely to continue until there is clarity on the tariff front. 

Investors await updates on tariffs on pharmaceutical imports to the US, which President Donald Trump said are likely to come soon.

US$1 = INR 86.69

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

Edited by Deepshikha Bhardwaj

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