Are U.S. Tariffs Breaking India’s Bulls?

Markets Overview

The past week was not a great one for the markets. There were multiple utterances from the U.S. regarding tariffs on India’s pharma and IT sectors, which added considerable uncertainty. On top of that, large-cap IT stocks like Accenture saw steep declines in the U.S., creating negative headwinds for the sector globally. The continuous selling pressure from FIIs also added to the gloom. Overall, positivity was scarce, and the market sentiment remained weak. Another angle to this downturn comes from the global trend where markets tend to decline after rate cuts, a phenomenon I had discussed in my earlier videos. It is difficult to isolate one single reason for the decline in Indian equities this week, but the combination of tariff worries, global weakness, and the after-effects of rate cuts all seem to be weighing heavily on investor sentiment. The result is a dull and challenging week where markets seem to be testing the conviction of the last standing bulls, even though index levels are not yet alarmingly bad.

Looking at the daily chart of Nifty, the picture becomes clearer. The index has registered seven consecutive red candles, six of which ended with lower closes. This has brought Nifty back down near the key support zone of 24,400–24,300. What is more concerning is that we have slipped below both the 20-DMA and the 100-DMA, signaling that near-term momentum has clearly faded. During the first half of September, there was optimism that the market had broken above a pivot point and might push towards fresh highs. However, that move has fizzled out, and the charts now suggest a possible retest of lower support levels. If the index can hold the 24,300–24,400 zone, it would be a constructive sign, but if this support cracks, it opens the door for deeper pain in the near term.

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Another day begins, and once again a big shock comes from Mr. Trump’s tweet. He has announced that the US will put a 100% tariff on all non-generic pharma imports. Only those companies that are currently building plants in the US will be spared. Any other pharma product that enters the country will face these tariffs starting next week.

Most Indian pharma exports are generic in nature, but some companies will still get impacted. The pharma industry usually begins with generics and then moves to more advanced products and licenses. That entire value addition process can suffer badly unless Indian companies have manufacturing units in the US.

Rebalance Update for the week