Sensex, Nifty brace for gap-down start on Trump's China tariffs; RBI policy outcome eyed

Sensex, Nifty: Benchmark stock indices look set to see a gap-down start on Wednesday, as the US-China trade war just got intensified, thanks to imposition of 104 per cent tariffs on China by the US administration, effective midnight in a response to China's retaliation to the earlier US tariffs. 

Wall Street indices fell up to 2.15 per cent overnight, while markets in Asia such as Japan, Hong Kong and China were down up to 3 per cent earlier today. Gift Nifty also tanked about 222 points to 22,408, hinting at a gap-down start for Indian indices. All eyes on a now on the RBI policy outcome today. 

'Spine of steel': Trump 
In recognition of the fact that the PRC has announced that it will retaliate against the US in response to executive order 14257, Trump -- effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am. eastern daylight time on April 9, 2025 imposed further tariffs on China. 
White House dared China to retaliate against Trump’s 104 per cent tariff and said he has got 'Spine of Steel' and that he would not break. 

In the US, a more front-loaded inflation shock and growth slowdown to a near-recession is likely, with the Fed holding off cutting rates until December, Nomura said. 

Non-linear events, tipping the economy into recession, is a clear risk to baseline, it said.

Nomura said it continues to believe that India is the least exposed to the US tariff shock, and could benefit from the ongoing global supply-chain shifts. 

RBI policy outcome 

HSBC Global Research said the stage is set and that it expects the RBI to deliver a 25bp repo rate cut today, taking the repo rate to 6 per cent. It also expects RBI's MPC committee to discuss/implement steps that help sustain liquidity at surplus levels. 

"We believe the RBI may lower its growth and inflation forecasts. Following the April rate cut, we expect two more rate cuts of 25bp each in the June and August meetings, taking the repo rate to 5.5%, which is our estimate of neutral," HSBC said.

While the US is at risk of heightened inflation with tariffs on imports, the FOMC has kept the benchmark rate unchanged in the range of 4.25 per cent to 4.5 per cent in its last meeting. 

"The rate cut by the RBI could benefit India by making borrowing cheaper for individuals and businesses, leading to higher spending and investment," said Ajay Garg, CEO, SMC Global Securities.

What's ahead?
Harshad Patwardhan,  Chief Investment Officer at  Union AMC  said while short-term challenges such as global geopolitical tensions and trade-related uncertainties persist, India’s long-term macroeconomic fundamentals remain strong. 

"Healthy corporate and banking sector balance sheets, prospects of a demand revival fueled by tax relief and expanded welfare schemes, and the potential onset of a new private capex cycle are key positives driving our outlook,” he said.