Nifty set for 300-point gap down as Trump tariff shock hits markets

Global markets are in a tailspin after US President Donald Trump’s “Liberation Day” proposal. Equities in Australia, Japan, and South Korea tumbled between 1 per cent and 3.5 per cent. S&P 500 futures crashed over 3.5 per cent, while contracts on the Nasdaq 100 slid 4.5 per cent. 

Gift Nifty 23,175 signals a gap down opening of about 300 points following the US.

According to analysts, the proposal will impact export-oriented sectors such as pharmaceuticals, iron and steel, auto and auto component suppliers, electronic goods, and information technology.

Amit Sarkar, Partner, Bhuta Shah and Co LLP, said. At the same time, the “reciprocal tariffs” introduced by the US Government under Donald Trump’s leadership are seen with some dismay by India Inc. The impact remains more sectoral than general for Indian businesses. US-centric businesses such as pharma, iron and steel, electronics hardware, and auto parts would remain impacted with higher import tariffs. 

“However, the US is increasing tariffs for most countries, including India. In the absence of any specific action on India-originated products, the incidence of higher import tariffs would immediately be felt within the US domestic market with higher prices of end-user goods for the US market,” he said.

“It remains to be seen if the tariff barriers introduced by the US Government would cause US businesses to “in-source” manufacturing within the USA given the high prices of key factors of production, particularly high labour costs,” he further said.

According to Kelvin Wong, Senior Market Analyst at OANDA, an increasing probability of stagflation risk in the US may further narrow the 2-year sovereign yield premium spread between US Treasuries and JGBs.

Trading in derivative markets also signals a bearish trend.

Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities, said: Derivative data suggests a slightly bearish tilt, as call writers have outpaced put writers, indicating a weakening sentiment. The 23,500 strike saw aggressive call writing (1.51 crore contracts), cementing it as a strong resistance level. “Meanwhile, put writing at 23,000 (1.19 crore contracts) highlights a solid support area, though sellers are gaining confidence at higher level. “The Put-Call Ratio (PCR) climbed from 0.63 to 0.87, reflecting a shift towards cautious positioning by traders. With Max Pain at 23,300, bears continue to absorb bullish attempts, hinting at potential downside pressure,” he added.

India VIX, the market’s fear gauge, declined 0.44 per cent to 13.72, suggesting reduced uncertainty. However, as long as the VIX remains below 15, market conditions are likely to stay relatively stable, with measured volatility, he further said.

However, some analysts expect the market to regain strength in the later part of the day after the initial knee-jerk reaction.