All eyes are now on Dalal Street when the markets open for trade tomorrow at 9:15 am. The big question is whether Donald Trump‘s 25% tariff on Indian goods plus penalty will spook markets. Most market observers believe that there can be some amount of knee-jerk reaction, given how the GIFT Nifty is trading at the moment.
The GIFT Nifty is trading more than half a percent lower. It has slipped below the psychologically important level of 24,700. Over the past few sessions the markets have been rangebound. But if you track the Nifty’s journey between April 2, when Trump first announced the tariff to now—July 30 close, it has gained a little over 7%. The Nifty has steadily moved up from 23,000 levels close to 25,000 levels. The Sensex too had moved up about 4,864.49 points in the same period, about 6% plus gains.
Nilesh Shah says ‘need for growth supporting Policy’
But Nilesh Shah, MD – Kotak Mahindra AMC, expects markets to react negatively to the current announcement by Trump, “Markets will react negatively to the imposition of tariffs on India. Despite the unpredictable policymaking of US, the market was expecting a tariff deal to work out, as longer-term US-India strategic interests are aligned.”
He added that this announcement should be a wake up call for the government to push for more growth-orientated policies. “Markets will hope for a “TACO” trade if better senses prevail. China is defying US / UN sanctions on Iran oil, Myanmar and Russia Trade and North Korea Support. Size and the competitiveness of the economy have their advantages. I hope and pray that this unilateral imposition should accelerate Indian policymaking to be growth supportive. Our biggest deterrents continue to remain GDP size and competitiveness.”
Key sectors that are likely to be affected
The overall market will be in focus. However, there are some key sectors that would be in spotlight-
Nifty IT Index, tech sector
The Nifty IT Index has risen about 4% between April 2 till now. However, the tech sector has been at the centre of focus given the implications for business as a whole. There are concerns that there might be delays in deal closures and new deal signing. Supply chain disruption and higher costs are the other big worry for the technology sector.
The rising layoff trend in the tech sector is another big concern area.
Auto stocks and Nifty Auto Index
The Nifty Auto Index has put up a rather stable show in this period between April 2-July 30. The index has risen less than a percent. Key auto component stocks would be in focus after the tariff announcement. However, many of these companies have facilities in US and the exact impact of the tariff levy is yet to be ascertained.
Pharma stocks and Nifty Pharma
The Nifty Pharma Index has remained more or less unchanged in the past 3 months since the tariff chatter began. One important reason was the fact that the tariff on pharma was not announced initially, and the uncertainty with regards to the exact tariff continues. Key stocks like Dr Reddy’s and Lupin are going to be in focus, given the significantly higher exposure to the US markets.
Apart from that, several other sectors, including gems and jewellery, textiles, and electronic goods, would be in focus.
Many experts pointed out that the India-UK deal can be used as a template for a longer-term policy decision, and “a well-negotiated deal that addresses all aspects of trade, investment, and tariff and non- tariff barriers by September/October 2025 is likely to yield long-term benefits.” added Garima Kapoor, Economist and Executive Vice President, Elara Capital.
For now all eyes are on how the markets respond in the near term.