Bears to return? Nifty, Sensex may test support as US tariff move roils sentiment, RBI eyed; check key levels here

Traders will be watching the Reserve Bank of India MPC announcement closely.

Domestic benchmarks Nifty 50 and Sensex are likely to wipe all gains seen in the previous session as the White House draws closer to imposing sweeping, broad-based tariffs. However, the Reserve Bank of India's Monetary Policy Committee might take a dovish tilt later on April 9, which might offer traders and investors support.

The tariff stand-off between U.S. and China intensified, after U.S. slapped a 104 percent tariff levy on imports from China. Further, the country-specific reciprocal tariffs will take effect from April 9, 12:01 am Eastern Time, like earlier specified.

At 8.15 am, the GIFT Nifty index was trading at 22,465, lower by 0.6 percent or 130 points. Overnight, Wall Street extended losses to a fourth consecutive session, with S&P 500 giving up the 5,000 level, falling almost 19 percent from its all-time high. After opening in the green, the Dow Jones index tumbled 0.8 percent, while the tech-heavy Nasdaq Composite index cracked 2.5 percent.

Asian markets were also gripped with a bearish sentiment, as Japan's Nikkei 225 crashed three percent, while Hong Kong's Hang Seng index and the Taiwan Weighted index tumbled two percent. Indices in China, such as the Shanghai Composite and the CSI 100 traded with cuts.

So far, the escalating trade war has raised concerns of a global recession, as uncertainty and volatility have dictated the sentiment. However, on the domestic front, the losses might be capped as the RBI MPC might trim the benchmark lending rate by 25 basis points during the session, with possible change in stance to ‘accommodative’.

"The tariff shock has increased our conviction that the RBI will cut 25 bps this week, with further easing ahead. The aim would be to facilitate faster monetary policy transmission – something that the RBI has evidently displayed by the swift liquidity injection," said Madhavi Arora, Lead Economist at Emkay Global Financial Services.

However, while the RBI's move will cushion the tariff blow, global cues and tariff-related uncertainties are likely to dictate the sentiment going ahead.

"Participants are advised not to read too much into this single-day recovery, as tariff-related developments are likely to keep volatility elevated. Moreover, the upcoming outcome of the MPC’s monetary policy meeting could add to the market swings, especially on the weekly expiry day. We recommend maintaining a hedged approach, focusing on stocks showing relatively higher strength," Ajit Mishra – SVP, Research, Religare Broking said.

On the derivatives front, according to the weekly options data, the 23,500 strike holds the maximum Call open interest (with 1.22 crore contracts). This level can act as a key resistance for the Nifty in the short term. It was followed by the 23,000 strike (99.32 lakh contracts), and the 23,300 strike (88.85 lakh contracts).

"Adding to the pressure, significant call writing at higher strikes hinted at persistent bearish sentiment," said Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities.

From a technical perspective, Dhameja noted that the index managed to settle just above the 22,500 mark, establishing it as immediate support. The high and low of today’s candle at 22,700 and 22,270, will be pivotal levels in the next session, serving as short-term resistance and support respectively.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.