Trump Trade: Strategies for Indian IT, Pharma indices post US elections

Analysts believe that Indian export-oriented sectors such as pharma and IT may experience challenges under Donald Trump's rule. Here's how Nifty IT and Pharma indices are placed on charts.

The Indian equity market rallied sharply in trades on Wednesday on the back of bargain buying and clarity on the US election verdict. Early leads from the US Presidential Elections showed that Donald Trump was all set to reclaim the office. Post victory, Donald Trump shall take charge in January 2025.

 

The BSE and NSE benchmark indices surged over 1 per cent each to 24,450 and 80,300 levels in intra-day deals. Meanwhile, indices of export-oriented sectors such as the Nifty IT index zoomed 4 per cent to 42,050 levels, while Nifty Pharma index gained 1.2 per cent.

 

A Republican-led government under Trump could significantly reshape trade dynamics, with heightened tariffs and a more protectionist approach to international trade, said Nitin Aggarwal Director of Investment Research and Advisory at Client Associates.

 

 

Client Associates (CA) is India's largest multi-family Wealth Management Firm with an AUM of over $6 billion.

 

One of the key focal points of Trump's presidency was reducing the US trade deficit, a policy that heavily relied on increasing tariffs on imports. While these measures could help shrink the trade deficit, they risk pushing up inflation by making imported goods more expensive and possibly delay interest rate cuts by the US Federal Reserve, explained Nitin Aggarwal in a note.

   

For India, the consequences of such a policy shift could be two-fold. First, certain sectors like Pharmaceuticals and IT may experience challenges. Indian generic drug manufacturers could face increased tariffs on their exports to the US, affecting the pharmaceutical industry. Meanwhile, India's IT sector might also see a slowdown in demand, as a trade war and economic slowdown could reduce discretionary spending in the US, the note stated.

 

Against this background, here's a technical check on the key sectoral indices:

 

Nifty IT

Current Level: 42,085

Upside Potential: 10.7%

Support: 40,900

Resistance: 43,730; 44,830; 45,725

 

The Nifty IT index unlike, the benchmark indices and other peers, which dipped below the 100-DMA (Daily Moving Average), seems to have found support at the 100-DMA. The index has bounced back and at present is seen testing resistance at its 50-DMA at 42,190 levels. CLICK HERE FOR THE CHART

 

  Going ahead, the bias for the Nifty IT index is likely to remain upbeat as long as the index sustains above 40,900 levels. On the upside, the index can potentially soar to 46,600 levels, with interim resistance likely around 43,730, 44,830 and 45,725 levels.

 

Nifty Pharma

Current Level: 22,960

Upside Potential: 8.9%

Support: 22,309; 21,450

Resistance: 23,560; 23,770; 24,300

 

The Nifty Pharma index has managed to sustain above its 20-WMA, a key moving average the index has held since breakout in December 2023. The 20-WMA now stands at 22,309, below which the next key support stands at 21,450. The bias for the Pharma index is likely to remain upbeat as long as these support levels are held. CLICK HERE FOR THE CHART

 

On the upside, the Nifty Pharma index can rally to 25,000-mark; with interim resistance expected around 23,560, 23,770 and 24,300 levels.