F&O Talk | Nifty loses key supports amid tariff turmoil: what’s next? Preeti Chabra weighs in

The long-anticipated reciprocal tariffs had been lastly unveiled by President Trump this week, jolting international asset lessons—from equities and bonds to currencies and commodities. The U.S. administration launched a baseline import tariff of 10% on all international locations.

India, nevertheless, confronted a comparatively milder tariff price of 26%, which positioned its fairness markets to outperform a number of Asian friends. Regardless of this, Indian benchmark indices ended the week 2.6% decrease, largely dragged down by an 8.4% plunge in the IT index. The sharp decline in IT shares displays mounting fears of a U.S. recession, a essential marketplace for the sector’s income stream.

Between March 28 and April 4, each the Nifty and Sensex indices recorded a decline of two.6%. The Nifty fell from 23,519.4 to 22,904.5, whereas the Sensex dropped from 77,415 to 75,365 throughout the identical interval.

In such a market, analyst Preeti Ok. Chabra, Founding father of Commerce Delta, interacted with ET Markets concerning the outlook on Nifty and Financial institution Nifty, together with index methods for the upcoming week. Following are the edited excerpts from her chat:

Regardless of weak international cues and tariff-related jitters, the Indian market tried to point out resilience and held key ranges. Nevertheless, on Friday, it took a downturn. How do you now interpret the worth motion from an choices market perspective—do you see additional draw back?

With the implementation of the 27% reciprocal tariff price on imports from India, we’re higher positioned than most of our aggressive Asian friends like Bangladesh and Vietnam. At present, the market shouldn’t be following any technical indicators and is totally news-driven, as plenty of structural modifications are occurring with new tariffs coming into place worldwide. The worldwide provide chain goes to alter, and there are plenty of unknowns.

I imagine India is properly positioned, and this may very well be a possibility for us to higher compete with China, the place the tariff influence is relatively greater. The day after the tariff was introduced, on April 3, the Indian market didn’t dump and was holding agency, which gave us a sign that we’d go by means of this occasion. However on April 4, we gave away the necessary latest low—23,132—and the Fibonacci retracement degree of 23,141, which we had been holding since March 21. I wish to repeat that that is at the moment a news-driven market, and sentiment can change at any time.

The 200-DEMA is rising as robust resistance. What sort of choice methods would you suggest for Nifty now?

Nifty is at the moment buying and selling in a downward-trending channel. We see additional draw back as international information stays damaging, with GIFT buying and selling round 22,343—an extra decline of two.68%. Because the market construction is now damaging, we advise a ‘sell-on-rise’ technique. Given the excessive volatility, bare positions can hit stop-losses very simply, so a technique with a hard and fast reward-to-risk ratio is the way in which ahead. We will take into account a Bear Put Unfold or a Bear Put Butterfly to reap the benefits of the bearish sentiment.Financial institution Nifty defended its 200-DSMA and ended with a bullish candle.

Do you see the potential for a breakout, and the way ought to merchants strategy it utilizing Financial institution Nifty choices?

Financial institution Nifty is at the moment buying and selling in a downward-sloping channel, connecting the excessive of 53,888 on December 5 and 52,063 on March 25. For Financial institution Nifty to show constructive on a much bigger timeframe, it has to shut above this channel. A breakout above 52,063 will place Financial institution Nifty in a snug constructive zone.

We additionally see consolidation occurring in Financial institution Nifty—an oblong sample formation between March 24 and April 4—and any breach of fifty,742 on the decrease aspect shall be damaging for Financial institution Nifty.

So, on the upside, 52,063, and on the draw back, 50,742 are necessary ranges to look at. Merchants can take into account a Bull Name Unfold to reap the benefits of a bullish stance or a Bear Put Unfold to learn from bearish sentiment.

The broader market outperformed, with each Nifty Midcap 100 and Smallcap 100 closing in the inexperienced. However a reversal was witnessed on Friday. What’s your take there, and any bets?

Within the mid-cap and small-cap house, we’re specializing in the next names as we see upside in them in the close to future—Colgate, Marico, Max Monetary Providers Ltd, Ramco Cements, Torrent Energy, GMR Airports, Paytm, and PNB Housing.

Pharma and PSU banks appear to be main the market. Do you see sustained bullish positioning in these sectors that choices merchants can capitalize on?

The pharma sector was excluded from the person reciprocal duties on the day of the announcement, and we noticed an enormous run-up in pharma shares.

Nevertheless, on Friday, following forthcoming bulletins about extreme tariffs on this sector, we noticed a pointy decline. At this second, the pharma sector is news-driven, and sentiment modifications as information flows in.

The PSU Financial institution Index is holding up and performing higher than different sectors. We’re monitoring Financial institution of Baroda and SBI in this house.

IT and Auto had been underneath strain as a consequence of U.S. slowdown fears and tariff influence. Do you see additional draw back danger in these sectors, and what’s the easiest way to play them?

The auto sector shouldn’t be considerably impacted by the brand new tariff charges, as exports to the U.S. are minimal, and the sector is exempt from any extra duties past these carried out on March 26. We propose staying away from shares the place the tariff influence is greater, resembling Motherson, Tata Motors, and Bharat Forge. On this sector, we choose TVS Motor.

The IT sector won’t face direct tariff penalties, however weaker U.S. GDP development may gradual demand. Nifty IT is underperforming, and till we see a technical shift in momentum, we’d keep away from taking any bullish stance in this house.

We noticed robust lengthy build-up in names like PNB Housing, Patanjali, and IDFC First Financial institution. Would you suggest any bullish positions?

PNB Housing is trying constructive, and we see resistance at ₹977. A Bull Name Unfold will be made by shopping for the 940 CE and promoting the 980 CE.

Patanjali has resistance in the ₹1885–1900 zone. As soon as it breaks out of this vary, a Bull Name Unfold will be thought-about by shopping for the 1900 CE and promoting the 2000 CE.

IDFC First Financial institution made an open excessive of ₹60.5 on Friday and is dealing with resistance round ₹60.9. RSI has turned damaging, so it may be averted for now.

Brief build-ups had been noticed in counters like Jindal Metal, Persistent Techniques, and Hindustan Zinc. How can choices merchants construction bearish bets whereas managing danger?

Jindal Metal seems to be weak. A Bear Put Unfold will be carried out by shopping for the 850 PE and promoting the 820 PE.

Persistent has help at ₹4400. A Bear Put Unfold with a 4600 PE purchase and 4400 PE promote is advisable.

For Hindustan Zinc, to capitalize on bearish sentiment, a Bear Put Unfold with a 430 PE purchase and 400 PE promote is beneficial.

With Trump’s 26% tariff announcement and fears of a worldwide slowdown, how ought to choices merchants hedge towards occasion danger in the approaching periods—by means of index straddles, VIX-based methods, or calendar spreads?

India VIX, often known as the concern index, is buying and selling at 13.75, which, in my opinion, is on the decrease aspect contemplating the home and international volatility we’re at the moment seeing. I count on VIX to extend in the approaching periods. Therefore, lengthy butterflies or lengthy debit spreads are advisable. Within the present situation, it’s at all times sensible to hedge in a single day positions as a consequence of heightened gap-up and gap-down dangers.

Any sectors you want to convey into the limelight?

I stay constructive on the banking sector. Even in the present market situation, Financial institution Nifty seems stronger and extra resilient than some other sector. Furthermore, in the upcoming RBI coverage assembly scheduled for April 7–9, 2025, there’s an expectation of a 25 bps reduce in the repo price, bringing it down to six.25%—the primary reduce in practically 5 years. This would offer a powerful enhance to the banking sector and help broader financial development.

Any shares inside these sectors?

In personal sector banks, we see additional upside in HDFC Financial institution and ICICI Financial institution. Amongst PSU banks, we’re constructive on Financial institution of Baroda and SBI.

(Disclaimer: Suggestions, recommendations, views and opinions given by the consultants are their very own. These don’t symbolize the views of The Financial Occasions)