Nifty, Sensex trade flat as investors shrug off Trump's reciprocal tariffs fears; Nifty IT cracks 2.5%

Nifty IT index was the worst hit, crashing over 2.5 percent in trade.

Domestic benchmarks Nifty 50 and Sensex opened gap-down in trade on April 3, as higher-than-expected reciprocal tariffs from U.S. President Donald Trump weighed on sentiment. However, the indices reclaimed some morning losses as investors digested the tariff announcements to trade flat.

At 10:28 am, the Sensex was down 143.55 points or 0.19 percent at 76,473.89, and the Nifty was down 28.00 points or 0.12 percent at 23,304.35. About 2083 shares advanced, 1100 shares declined, and 125 shares unchanged.

U.S. President Donald Trump unveiled global reciprocal tariffs at an event at the White House. For India, the President announced 26 percent 'kinder' reciprocal tariffs. Despite US being a significant trading partner of India, Trump has termed the latter as a “tariff king” and “tariff abuser”.

The U.S. tariff blow to India is worse than expected, noted experts, adding that a blanket tariff of more than twenty percent could impact India's GDP by more than 50 basis points, noted international broking firm Macquarie.

A 26 percent tariff could have a potential impact of $30 billion on India's gross domestic product (GDP), which would amount to about 0.7 percent of the $4.3 trillion GDP India's likely to have by the end of the calendar year 2025, as per the International Monetary Fund (IMF).

For India, heightened trade tensions may weaken the INR and deter FDI, though domestic stimulus could offset risks. Further, foreign institutional investor selling that finally stopped in March, may resume, as FPIs might trim exposure to emerging markets, leading to volatility.

"After opening sharply lower, short covering and buying support are expected to emerge at lower levels as the event related uncertainties are behind us. Domestically-focused sectors and those exempted from tariffs, particularly BFSI and pharmaceuticals, may provide market stability", said Devarsh Vakil, Head of Prime Research, HDFC Securities.

Furthermore, the weekly index expiry is likely to contribute to volatility in trade today. “We recommend a cautious stance and favor a hedged approach until there is greater clarity on the index’s next directional move. However, stocks continue to offer trading opportunities on both sides, and participants should position themselves accordingly,” Ajit Mishra – SVP, Research, Religare Broking said.

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At 9.20 am, the Nifty Pharma index soared 4.4 percent, with Gland Pharma, Aurobindo Pharma and Dr Reddy's Labs emerging as the top gainers on the sectoral index, jumping up to 10 percent, as the White House has excluded pharmaceuticals products from the reciprocal tariffs announced by U.S. President Donald Trump.

IT and auto stocks, on the flip side, saw heavy selling pressure, as the sectors were weighed by negativity surrounding Trump's tariffs. The Nifty IT index cracked 2.5 percent, while the auto index was lower by over one percent in trade. HCL Tech, Infosys, Bajaj Auto, TCS and Wipro were the top losers on the Nifty 50 index.

On the global front, the tariffs fueled the risk-off sentiment as fears of trade war led to a sharp sell-off. The escalation of global trade tensions has also doubled the probability of a recession in the U.S. economy in the next twelve months.

Wall Street futures, Asian indices and currencies, along with the Nifty futures index GIFT Nifty crashed, as traders fled their equity holdings. On the flip side, investors flocked to gold, sending the price of the safe-haven asset soaring in trade.

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