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Informist, Friday, Aug. 29, 2025

By Simran Rede

MUMBAI – The equity market is expected to face more selling pressure next week due to the imposition of an additional 25% tariff by the US and the lack of progress on an India-US deal, according to analysts. Moreover, the fall of the rupee against the dollar is likely to prove a drag on the market by affecting foreign fund inflows, they said.

The Nifty 50 closed at 24426.85, down 74.05 points or 0.3%, after a slightly choppy session. The BSE Sensex ended at 79809.65, down 270.92 points or 0.3%. The benchmark indices ended lower for the second straight month. During the week, the punitive additional 25% tariff drove the selloff in the market. There is scope for the market to bounce back, but a revival will be short-lived, said Jay Vora, senior technical and derivatives analyst at Indiacharts. Vora pegged the support for the Nifty 50 at 24330–24150 points and resistance at 24600–24650 points.

In the absence of a trade deal between India and the US, some sectors will have to brace for a bigger impact if the US tariffs persist at the high rate of a cumulative 50%, analysts said. Micro, small, and medium enterprises, which account for nearly 45% of India's exports, are the most at risk, Dipti Deshpande, principal economist at Crisil, said in a report on industrial production data released Thursday. The US accounts for 20% of India's manufacturing exports. According to reports by Crisil Intelligence and Crisil Ratings, textiles, particularly readymade garments, gems and jewellery, in particular diamond polishers and exporters, and chemicals are expected to be hit the most by the US tariffs.

India's GDP grew faster than expected to a five-quarter high of 7.8% in the June quarter, boosted by higher growth in the services and manufacturing sectors, data released by the statistics ministry Friday after market hours showed. A quarter ago, the economy had grown 7.4%. A year ago, GDP had risen 6.5%. Additionally, industrial production in India rose to a four-month high of 3.5% in July from a 10-month low of 1.5% in June, picking up on the back of an improved performance by the manufacturing sector, data from the ministry showed Thursday after market hours. These two data sets may provide some support to the equity market.

Foreign brokerage UBS expects the profit pool of India's financial sector to grow at a 13% compounded annual growth rate over six years ending the financial year 2029-30 (Apr-Mar). It sees banks growing at a compounded annual growth rate of 11% over FY25-FY30, slower than non-banks, due to weak corporate demand and margin pressure, partly offset by gains in efficiency. On the tariffs front, the brokerage believes there is a possible downside risk to India's growth of 35 basis points in FY26 and 60 bps in FY27 if the 50% tariff persists. Exports to the US account for $87 billion, or about 2.2% of India's GDP.

Shrimp exporting companies such as Apex Frozen Foods and Avanti Feeds will be in focus as Crisil Ratings sees a fall of 15-18% in India's shrimp export volume in FY26 with the rise in US tariff. Realisations are also expected to fall, even as exporters look to change their product mix and scout for alternative destinations, the brokerage said. This will result in an 18-20% on-year decline in revenue. In FY25, India exported around $5 billion of shrimp, with the US accounting for around 48% of this. The lower revenues, coupled with the inability to pass on the tariff burden to customers, will erode the companies' operating profit margin by 150-200 basis points, Crisil said. While Apex Frozen Foods derived 52% of its revenue from the US in Oct-Dec, Avanti Feeds derived 69% of its revenue from the North American market.

While Indian textile and apparel exports in 2025 are expected to decline marginally, a significant decline in exports to the US is expected in 2026 following the sharp rise in tariff, potentially reducing overall textile exports by 9-10% to nearly $30 billion, CareEdge Ratings said in a report.

Market participants will focus on Prime Minister Narendra Modi's visit to China to attend the Shanghai Cooperation Organisation's summit in Tianjin on Sunday and Monday. Additionally, investors will assess the HSBC India Manufacturing Purchasing Managers' Index for August, due 1030 IST Monday.  End

Edited by Rajeev Pai

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