Auto, Pharma Stocks Fall Up To 6% In 3 Sessions On US Tariff Fears; What Investors Should Know – News18
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In early trade on Friday, these stocks dropped by as much as 3%, with the Nifty Auto and Nifty Pharma indices trading lower by 0.9% and 0.7%, respectively.
Auto, Pharma Stocks Fall
There’s noticeable anxiety among investors in the pharma and auto sectors ahead of the April 2 deadline, when US President Donald Trump’s tariffs are set to take effect. This has been reflected in the performance of these stocks, which declined for the third consecutive session on Thursday.
In early trade on Friday, these stocks dropped by as much as 3%, with the Nifty Auto and Nifty Pharma indices trading lower by 0.9% and 0.7%, respectively.
Despite the 6% drop in some stocks over the past three sessions, market experts believe the panic is overblown, as they remain optimistic about the long-term prospects for both sectors.
While the market had anticipated tariff hikes, Trump’s recent 25% tariff announcement on Wednesday for automobiles exported to the US caused a shift in sentiment. A White House official later clarified that the tariff would apply to auto and auto parts companies, along with additional duties and fees, and a 25% tariff will be added to the existing 25% levy on light trucks. The revenue generated from the tariffs is planned to be used for tax cuts for American companies.
This uncertainty has also affected the pharma sector.
Over the last three sessions, the Nifty Auto index has fallen by 2%, with Tata Motors seeing a steep 6% drop—the highest among its peers. Experts suggest that Jaguar Land Rover (JLR) may be particularly impacted by the tariff increase.
Samvardhana Motherson International, with operations across North and South America and Europe, dropped by 1.6%, while Sona BLW Precision Forgings plunged over 8% in the past four sessions.
Other auto companies such as Bharat Forge, Tube Investments of India, Balkrishna Industries, Ashok Leyland, Bajaj Auto, Maruti Suzuki India, Exide Industries, Mahindra & Mahindra, Eicher Motors, and MRF saw declines ranging from 3.5% to 0.7%.
In terms of technicals, the Nifty Auto index has found support around the 100-week moving average (WMA) at 20,530, and it is attempting a pullback from oversold levels. Technical charts suggest that the index could rebound to 23,900 levels, offering an upside potential of nearly 11%. Interim resistance for the index is seen at 21,940, 22,080, 22,550, 22,650, and 23,070 levels.
On the pharma front, the Nifty Pharma index fell by 2.3%, with 17 out of 20 stocks in the index dropping by as much as 5%. Companies like Ajanta Pharma, Lupin, Granules India, Dr. Reddy’s Laboratories, JB Chemicals & Pharmaceuticals, Aurobindo Pharma, Zydus Lifesciences, Sun Pharmaceuticals, Cipla, Alkem Laboratories, Abbott India, Torrent Pharmaceuticals, Biocon, Natco Pharma, Laurus Labs, Divi’s Laboratories, and Gland Pharma were among the underperformers.
Company-specific developments also contributed to the market turmoil. For instance, Ashok Leyland announced plans to halt manufacturing at its UK electric bus subsidiary, Switch Mobility, due to mounting losses. Additionally, Hinduja Automotive, one of its promoters, pledged nearly 30% of its holdings worth over Rs 6,400 crore, according to an exchange filing.
JB Chemicals faced increased selling pressure after a block deal occurred.
Over the past month (until Thursday), the Nifty has gained nearly 7%, while the Nifty Auto index has struggled to make much headway, rising by less than 1%. The Nifty Pharma index saw returns of 5.3%, still underperforming the broader market.
InCred’s Perspective: India May Have Little to Lose
InCred, in a recent note, argues that India is less likely to be severely impacted by Trump’s tariff war. Given that the World Trade Organization (WTO) has been largely sidelined by the US, this creates an opportunity for India to capitalize. India currently enjoys a modest trade surplus of $28-30 billion with the US.
While tariff threats to Indian companies with US operations exist, Tesla’s entry into India remains a concern for domestic automakers. Auto stocks saw a sharp decline following Tesla’s announcement of its plans to enter the Indian market.
“In the case of Tesla, the company may enter India with zero tariffs, but its success could depend on the strength of its distribution network and charging infrastructure,” InCred noted. Additionally, India could impose stricter trade restrictions on China after making some strategic concessions.
Outlook for Domestic Auto and Pharma Sectors
Mayuresh Joshi, Head of Equity at Marketsmith India, noted that domestic-focused companies are likely to continue performing well, despite challenges for EV players. He believes global EV adoption may slow down, and the R&D investments of major EV platforms like JLR, Volkswagen, Mercedes, and BMW could face financial constraints, impacting their balance sheets.
Market expert Sandip Sabharwal anticipates some short-term disruptions for domestic pharmaceutical companies if tariffs are imposed. However, he suggests that the cost impact will likely be passed through to consumers, and any negative effects will likely be short-lived.
Echoing a similar sentiment, Emkay believes that sectors such as auto, pharma, and electronics are better positioned than feared, despite concerns that India could face significant impacts from reciprocal tariffs.
Nifty Auto Technical Outlook
The Nifty Auto index is showing mixed trends across various timeframes. In the short term, the index is likely to trade with a positive bias, provided it holds above the 20,860 levels, with immediate support at 21,100 levels. Long-term charts suggest that the overall outlook remains cautiously optimistic as long as the index stays above 20,280 levels.
