Indian shares set for cautious open as oil, US drug tariffs bite
Indian equities are poised to open lower despite a broad Asian rally, as surging crude oil prices and a proposed US tariff escalation on generic medicines threaten corporate margins and a critical export sector.
Indian equity indices are signaling a muted start on Wednesday, disconnecting from a broader regional rally driven by semiconductor shares. Gift Nifty was trading at 24,111.5 early Wednesday, a discount of 69.1 points to the previous close, pointing to a third consecutive session of pressure. The benchmark Nifty 50 fell 0.21% to 24,187.70 on Tuesday, while the Sensex lost 0.31% to close at 77,470.11.
The divergence stems from India's specific vulnerability to rising energy costs and a newly announced threat to its pharmaceutical export industry. While Wall Street rallied overnight and Asian markets surged—South Korea's Kospi jumped more than 5% and Japan's Nikkei 225 advanced nearly 2%—domestic investors are focused on the inflationary impact of escalating Middle East tensions.
Brent crude climbed 1.22% to $92.12 a barrel and US West Texas Intermediate gained 1.09% to $85.26 amid fears of fresh supply disruptions. The US military conducted its 11th consecutive day of strikes on Iran, targeting military and logistics infrastructure, while President Donald Trump signaled further escalation by mentioning potential targets near Pickaxe Mountain. Safe-haven demand kept gold firm at $4,080.79 an ounce.
For India, a net oil importer, prices hovering near $85 threaten to inflate the import bill, complicate the domestic inflation outlook, and squeeze corporate profit margins. "Elevated crude oil prices and persistent geopolitical tensions are likely to temper risk appetite," said Ponmudi R, CEO of Enrich Money.
Compounding the geopolitical risk is a targeted US trade policy shift. Trump announced a phased tariff plan on imported generic medicines, maintaining zero duties until August 2028 before spiking to 100% for one year and then 200%. India is the world's largest supplier of generic drugs to the US, making the proposal a significant structural risk for the sector.
On the technical front, the Nifty 50 continues to consolidate. "Nifty 50 continues to consolidate within its prevailing range while holding firmly above the crucial 24,000 support zone," said Ajit Mishra, Senior Vice President of Research at Religare Broking. He noted mixed performance in heavyweight banking and IT sectors, advocating a stock-specific approach rather than broad directional bets. For Bank Nifty, Ponmudi R identified immediate resistance at the 58,000-58,100 zone, with critical support at 57,500.
