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Informist, Tuesday, Mar. 25, 2025

By Gopika Balasubramanium

MUMBAI – With a week left for reciprocal tariffs by US President Donald Trump to take effect, Indian equities may fall on Wednesday due to continued profit-booking, analysts said. On Tuesday, the indices could hardly sustain their early gains and even slipped briefly into the red as investors booked profits. This trend is likely to continue on Wednesday, analysts said.

Overnight, the US president had said he might take a more measured approach on tariffs against the US' trading partners. However, he also said he would levy a secondary 25% tariff on countries that import oil and gas from Venezuela. He also clarified that any other reciprocal tariff would be imposed separately. That said, Trump has set Apr. 2 as the deadline for imposing reciprocal tariffs on countries. So far, he has imposed 20% duty on Chinese imports, a 25% tariff on global aluminium and steel imports, and levied 25% tariffs on imports from Canada and Mexico. 

The Indian government is likely to be looking to reduce the risks of tariffs from the US. India is open to reducing tariffs on over half the US imports worth $23 billion in the first phase of a trade deal the two nations are negotiating, Reuters reported, quoting two government sources. This would be the biggest cut in import duties in years, the report said, and added that it is "aimed at fending off reciprocal tariffs". 

Benchmark Indian indices, along with their global peers, had seen a sell-off earlier this month following Trump's back-and-forth threats on reciprocal tariffs. However, there seems to be a glimmer of hope as analysts feel Trump's actions on India may not be as severe as with countries with hefty trade deficits with the US. India's trade deficit with the US was $45.7 billion in 2024, as per the US State Trade Representative website.

The recent rally in the market is predominantly due to easing of the dollar index, the rupee appreciating against the dollar, and short-covering by foreign investors, Sunny Agrawal, head of research at SBICAPS Securities, said. The long-short positions of foreign investors in the derivatives market have increased to 32% from 14-15% earlier, which led to the spike in the cash market, he said. Further, valuations have also come to fair levels in many pockets, he said. 

In terms of tariffs, he said Trump was unlikely to punish pharmaceutical companies much because this could increase healthcare costs for US citizens. However, clarity is awaited on tariffs on automobile and jewellery imports, he said. Till then, the market is likely to be in a wait-and-watch mode, he said.

Analysts also said that with the March quarter coming to an end, investors will shift their focus to earnings and look for management commentaries on the outlook for the coming financial year. The last three quarters were not as impressive as expected with lower spending by the government and high interest rates. 

Given the low base quarter in 2024-25 (Apr-Mar), companies' earnings may grow in double digits in the March quarter, which can be seen from the first quarter of FY26, Agrawal said. He also said that FY26 would be better than FY25 for companies because of the liquidity-boosting measures and monetary policy easing by the Reserve Bank of India and efforts by the government to revive demand through revision in tax slabs. The spending power of government employees will rise because of the eighth Pay Commission, which will help revive the demand scenario, he said.

On Tuesday, headline indices closed marginally higher, with the Nifty 50 ending at 23668.65 points and the BSE Sensex ending at 78017.19 points. Immediate support for the Nifty 50 is seen at 23600 points and resistance at 23800 points, Rupak De, senior technical analyst at LKP Securities, said in a note.

Technically, a gap-down open for the Nifty 50 is possible on Wednesday as the index rejected the weekly short-term high of 23804 points and closed near the day's low, Anshul Jain, head of research at Lakshmishree Investment and Securities, said. Due to profit-booking, the index can touch as low as 23200 points as there may be 'double selling' as some investors who have held their stocks for the past 8–12 weeks will try to break-even and those who bought them at low prices will try to book profits.  End

US$1 = INR 85.76

Edited by Avishek Dutta

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