Indian financial markets are bracing for two critical announcements on Wednesday: the Reserve Bank of India’s monetary policy statement and a potential new round of US tariff sanctions. Both events are expected to drive near-term market sentiment.
Expectations have shifted in recent days, with many economists now forecasting a rate cut of 25 basis points, as concerns grow over slowing growth amid global trade tensions. The RBI is likely to ease rates slightly to support exports and cushion the economy from external shocks, particularly the US tariff threat.
Donald Trump, after announcing a 25 percent tariff on Indian goods on July 31, warned late Tuesday of a “very substantial” increase in duties within 24 hours, citing India’s continued purchase of Russian oil. This announcement came after Indian markets had closed but is expected to weigh on Wednesday’s session.
Market participants are also closely watching how the RBI revises its GDP growth and retail inflation forecasts in the face of mounting global headwinds.
India has defended its energy trade with Russia, stating that such imports help stabilise global prices. Officials have also pointed out that the US and Europe continue substantial trade with Russia, including imports of LNG, uranium, fertilisers, and chemicals.
In the derivatives market, Gift Nifty closed Tuesday night at 24,637 and opened Wednesday at 24,654, rising to 24,690 in early trade, indicating a likely muted start for domestic equities.
European markets ended in the green on Tuesday, though gains were capped by Trump’s announcement of upcoming chip tariffs. Switzerland is currently in talks with US officials in Washington to roll back a 39 percent duty. Trump has warned that if a proposed $60 billion EU investment fails to materialise, he may hike tariffs to 30 percent. He also threatened duties of up to 250 percent on pharma imports, though markets shrugged off the warning.
US markets declined on Tuesday amid fears of stagflation, following weak services PMI data for July and tepid job growth numbers. Expectations of fresh tariffs on chips and pharmaceuticals added to investor concerns.
Dow Jones fell 61.90 points (0.14 percent) to close at 44,111.74. S&P 500 dropped 30.75 points (0.49 percent) to 6,299.19. Nasdaq Composite slid 137.03 points (0.65 percent) to 20,916.55.
Futures traded mixed on Wednesday morning: Dow was up 0.06 percent, S&P up 0.04 percent, while Nasdaq was down 0.19 percent. AMD and Snap dropped in after-hours trade following weak earnings.
Asian equities were broadly mixed. Japan’s Nikkei recovered after a weak start. South Korea and Australia posted gains, while Chinese and Hong Kong markets declined.
Despite official efforts to downplay the tariff threat, Indian equities closed lower on Tuesday, rattled by uncertainty over the RBI’s decision and Trump’s tariff rhetoric. The rupee’s continued weakness also weighed on sentiment.
--Major exporters, particularly in the textile and pharma sectors, were hit hard
--Pharma stocks like Aurobindo, Lupin, Dr Reddy’s, Sun Pharma, and Torrent fell 4–7 percent
--Textile exporters including Gokaldas, Vardhman, Welspun, Raymond, and Trident plunged 7–17 percent
--Kitex Garments declined 5 percent despite strong earnings; the stock is down 30 percent in a month
--Oil and gas companies, including Reliance and OMCs, also ended in the red. Large private banks dragged key indices lower.
--Only autos, metals, and consumer durables ended with gains. FMCG, IT, realty, healthcare, banks, and financials closed in the red.
--Nifty 50 dropped 73.20 points (0.30 percent) to 24,649.55
--Sensex declined 308.47 points (0.38 percent) to 80,710.25
--Bank Nifty slipped 259.10 points (0.47 percent) to 55,360.25
--Nifty Midcap 100 fell 225.50 points (0.39 percent) to 57,206.85
--Nifty Smallcap 100 dropped 28.85 points (0.16 percent) to 17,864.55
--On the BSE, decliners outnumbered gainers 2,371 to 1,672. On the NSE, 1,200 stocks rose while 1,784 fell.
Despite a steady US dollar index, the rupee slid to a record low of 87.80 on Tuesday, down 14 paise. The dollar index closed at 98.78 and opened slightly higher at 98.81.
The market expects the rupee to weaken further, potentially breaching the 88 mark, especially if the RBI cuts rates.
In other currencies: Euro rose to $1.1566; pound sterling strengthened to $1.3295; Japanese yen weakened to 147.65 per dollar; US 10-year Treasury yields rose slightly to 4.218 percent as bond prices edged lower.
Gold prices rose on expectations of a US Fed rate cut in September. On Tuesday, gold surged $490 to close at $3,381.60/oz. The futures price is above $3,431/oz. In early Wednesday trade, gold was at $3,379.
In Kerala, gold price rose ₹600 on Tuesday to ₹74,960 per sovereign, just below the July 23 record of ₹75,040. A weaker rupee could lift prices further. Silver was trading at $37.84/oz.
In global agri-commodities: Rubber rose 1.03 percent to 166.10 cents/kg; cocoa gained 3.22 percent to $8,363/tonne; coffee climbed 3.52 percent; tea declined 0.73 percent; palm oil rose 2.48 percent; crude oil volatile; natural gas rises.
Crude oil: Prices swung sharply. Brent fell over 1 percent on Tuesday to $67.64/barrel, but recovered in early Wednesday trade to $67.95. WTI was at $65.43, and Murban crude at $70.75. Natural gas rose 1 percent.
Cryptos: Bitcoin remained below $113,750, and Ethereum fell 3 percent to $3,575.
