Sensex jumps nearly 700 pts from day's low; relatively lower US tariffs, 3 other reasons behind sharp recovery

Key Drivers of the Market Recovery

1) Pharma Stocks Rally on US Tariff Exemption: A major recovery was witnessed after the White House excluded pharmaceutical products from its reciprocal tariffs list. The move provided relief to the domestic pharma sector, which has significant export exposure to the US market.

Following the announcement, the Nifty Pharma index surged over 4 percent, with stocks such as Gland Pharma, Aurobindo Pharma, and Dr Reddy’s Laboratories jumping up to 5 percent.

"The exemption for the pharma sector is a positive development given its large exposure to the US market," Sonam Srivastava, founder and fund manager at Wright Research PMS told Reuters.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that Indian pharmaceutical companies benefit from the country’s strong position in the global generic drug market. "The exemption is a clear indicator that the US acknowledges the importance of affordable Indian generics. This will likely support continued buying in pharma stocks," he said.

Additionally, the US decision to impose tariffs on all imports gives India’s textile sector a competitive edge over countries like China, Vietnam, and Bangladesh, which now face higher levies.

"The latest tariffs may make Indian exports more competitive compared to China and Vietnam, which hold 21 percent and 19 percent of the market share, respectively, compared to India’s 6 percent," said Devarsh Vakil, Head of Prime Research at HDFC Securities to Reuters.

2) India’s Tariff Burden Lower Than Asian Peers: While the US announced a 27 percent reciprocal tariff on Indian goods, experts believe India remains better placed than some of its regional competitors.

New Delhi's Asian peers and neighbours such as China will face a steeper 54 percent (including 20 percent announced earlier), Vietnam will see an imposition of 46 percent, Bangladesh has been levied a higher duty of 37 percent followed by Thailand at 36 percent and Taiwan at 32 percent.

Global Trade Research Initiative's Founder Ajay Srivastava said that the imposition of higher reciprocal tariffs by the United States on several Asian countries, including China, Cambodia, Vietnam, Taiwan, Thailand, and Bangladesh, presents an opportunity for India to strengthen its position in global trade and manufacturing.

Karthick Jonagadla, Founder & CEO of Quantace Research, pointed out that India’s new tariff rate is still lower than its rivals, including China (34%), Vietnam (46%), and Bangladesh (37%). "With an overall GDP impact estimated at just 0.1 percent, India’s economy has enough cushion to absorb these changes," he added.

Steeper US reciprocal tariffs on Asian peers could aid Indian exports

3) Oil Prices Decline: A drop in crude oil prices of up to 3 percent also supported the market’s recovery, easing inflation concerns and boosting investor sentiment. Brent crude futures fell $1.97, or 2.63 percent to $72.98 a barrel, while US West Texas Intermediate (WTI) crude dropped $1.98, or 2.76 percent, to $69.73.

Lower oil prices are a positive for India, which is heavily reliant on imports. The decline helps reduce the country’s import bill, lowers fuel costs and provides relief on inflationary pressures.

4) Rupee Recovers: The Indian rupee traded at 85.62 against the US dollar, marginally stronger from the day’s opening of 85.78. The US dollar saw increased volatility as investors shifted towards safe-haven assets like the Japanese yen and Swiss franc following Trump’s aggressive tariff measures.

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