India equities stall in tight range as pharma tariffs bite
Indian stocks traded in a narrow band as new US tariffs on generic medicines hammered the healthcare sector, while slowing foreign selling and strong auto earnings provided a floor for the broader market.
Indian equities opened lower on Wednesday, with the Nifty 50 declining 0.41% to 24,089.20 and the BSE Sensex slipping 0.50% to 77,079.37. The benchmarks remain trapped in a tight trading band between 24,000 and 24,300, the zone holding the highest concentration of immediate call and put options bases.
Rising crude oil prices and escalating Middle East tensions initially dampened sentiment, pushing 10 of 16 sectoral indices into the red. However, the downside appears cushioned by a noticeable slowdown in foreign institutional investor selling in the cash segment and a reduction in index short positions.
The sharpest sectoral reaction came from pharmaceuticals, with the Nifty Pharma index dropping 1.6%. The decline followed US President Donald Trump unveiling a phased tariff plan on imported generic medicines, offering companies a two-year window before higher duties take effect.
Earnings reports drove divergent stock-specific moves. Bandhan Bank plunged 10% despite beating June-quarter estimates, as investors punished the lender's downgrade to its return-on-assets guidance for the financial year. Management cited expectations of softer net interest margins and rising operating expenses. Conversely, the auto sector outperformed, with Bajaj Auto climbing 4% and TVS Motor Company adding 3.5% after both posted higher quarterly profits.
Options structure points to trading ranges
Volatility expectations remain historically compressed, with the India VIX sitting at the lower end of its recent range between 12 and 13. While a further spike in crude could negatively impact the USDINR pair and lift the VIX, traders anticipate a sharp drop in oil prices if geopolitical tensions de-escalate.
Jay Thakkar of ICICI Securities advises investors to buy on dips near the broader support level of 23,800, or position for a breakout above 24,300. Within that framework, Thakkar highlights three futures trades for the current expiry week.
Jindal Steel is seen as ripe for a short-covering bounce, bolstered by rising international metal prices. The stock has a max pain level of 1,060 and a first target of 1,100 where the highest call base sits. NTPC has formed a bullish wedge pattern, and a breakout could trigger short covering toward targets of 360 and 367, with max pain at 350. Finally, Aditya Birla Capital shows a long-term buildup and consolidation above its 400 max pain level, which should act as near-term support.
