India, however, faced a relatively milder tariff rate of 26%, which positioned its equity markets to outperform several Asian peers. Despite this, Indian benchmark indices ended the week 2.6% lower, largely dragged down by an 8.4% plunge in the IT index. The sharp decline in IT stocks reflects mounting fears of a U.S. recession, a critical market for the sector’s revenue stream.
Between March 28 and April 4, both the Nifty and Sensex indices recorded a decline of 2.6%. The Nifty fell from 23,519.4 to 22,904.5, while the Sensex dropped from 77,415 to 75,365 during the same period.
In such a market, analyst Preeti K. Chabra, Founder of Trade Delta, interacted with ET Markets regarding the outlook on Nifty and Bank Nifty, along with index strategies for the upcoming week. Following are the edited excerpts from her chat:
Despite weak global cues and tariff-related jitters, the Indian market tried to show resilience and held key levels. However, on Friday, it took a downturn. How do you now interpret the price action from an options market perspective—do you see further downside?
With the implementation of the 27% reciprocal tariff rate on imports from India, we are better placed than most of our competitive Asian peers like Bangladesh and Vietnam. Currently, the market is not following any technical indicators and is completely news-driven, as a lot of structural changes are happening with new tariffs coming into place worldwide. The global supply chain is going to change, and there are a lot of unknowns.
I believe India is well positioned, and this could be an opportunity for us to better compete with China, where the tariff impact is comparatively higher. The day after the tariff was announced, on April 3, the Indian market didn’t sell off and was holding firm, which gave us an indication that we would pass through this event. But on April 4, we gave away the important recent low—23,132—and the Fibonacci retracement level of 23,141, which we had been holding since March 21. I would like to repeat that this is currently a news-driven market, and sentiment can change at any time.
The 200-DEMA is emerging as strong resistance. What kind of option strategies would you recommend for Nifty now?
Nifty is currently trading in a downward-trending channel. We see further downside as global news remains negative, with GIFT trading around 22,343—a further decline of 2.68%. Since the market structure is now negative, we advise a ‘sell-on-rise’ strategy. Given the high volatility, naked positions can hit stop-losses very easily, so a strategy with a fixed reward-to-risk ratio is the way forward. We can consider a Bear Put Spread or a Bear Put Butterfly to take advantage of the bearish sentiment.Bank Nifty defended its 200-DSMA and ended with a bullish candle.
Do you see the potential for a breakout, and how should traders approach it using Bank Nifty options?
Bank Nifty is currently trading in a downward-sloping channel, connecting the high of 53,888 on December 5 and 52,063 on March 25. For Bank Nifty to turn positive on a bigger time frame, it has to close above this channel. A breakout above 52,063 will place Bank Nifty in a comfortable positive zone.
We also see consolidation happening in Bank Nifty—a rectangular pattern formation between March 24 and April 4—and any breach of 50,742 on the lower side will be negative for Bank Nifty.
So, on the upside, 52,063, and on the downside, 50,742 are important levels to watch. Traders can consider a Bull Call Spread to take advantage of a bullish stance or a Bear Put Spread to benefit from bearish sentiment.
The broader market outperformed, with both Nifty Midcap 100 and Smallcap 100 closing in the green. But a reversal was witnessed on Friday. What’s your take there, and any bets?
In the mid-cap and small-cap space, we are focusing on the following names as we see upside in them in the near future—Colgate, Marico, Max Financial Services Ltd, Ramco Cements, Torrent Power, GMR Airports, Paytm, and PNB Housing.
Pharma and PSU banks seem to be leading the market. Do you see sustained bullish positioning in these sectors that options traders can capitalize on?
The pharma sector was excluded from the individual reciprocal duties on the day of the announcement, and we saw a huge run-up in pharma stocks.
However, on Friday, following forthcoming announcements about severe tariffs on this sector, we saw a sharp decline. At this moment, the pharma sector is news-driven, and sentiment changes as news flows in.
The PSU Bank Index is holding up and performing better than other sectors. We are tracking Bank of Baroda and SBI in this space.
IT and Auto were under pressure due to U.S. slowdown fears and tariff impact. Do you see further downside risk in these sectors, and what’s the best way to play them?
The auto sector is not significantly impacted by the new tariff rates, as exports to the U.S. are minimal, and the sector is exempt from any additional duties beyond those implemented on March 26. We suggest staying away from stocks where the tariff impact is higher, such as Motherson, Tata Motors, and Bharat Forge. In this sector, we prefer TVS Motor.
The IT sector will not face direct tariff consequences, but weaker U.S. GDP growth could slow demand. Nifty IT is underperforming, and until we see a technical shift in momentum, we would avoid taking any bullish stance in this space.
We saw strong long build-up in names like PNB Housing, Patanjali, and IDFC First Bank. Would you recommend any bullish positions?
PNB Housing is looking positive, and we see resistance at ₹977. A Bull Call Spread can be made by buying the 940 CE and selling the 980 CE.
Patanjali has resistance in the ₹1885–1900 zone. Once it breaks out of this range, a Bull Call Spread can be considered by buying the 1900 CE and selling the 2000 CE.
IDFC First Bank made an open high of ₹60.5 on Friday and is facing resistance around ₹60.9. RSI has turned negative, so it can be avoided for now.
Short build-ups were observed in counters like Jindal Steel, Persistent Systems, and Hindustan Zinc. How can options traders structure bearish bets while managing risk?
Jindal Steel looks weak. A Bear Put Spread can be implemented by buying the 850 PE and selling the 820 PE.
Persistent has support at ₹4400. A Bear Put Spread with a 4600 PE buy and 4400 PE sell is advisable.
For Hindustan Zinc, to capitalize on bearish sentiment, a Bear Put Spread with a 430 PE buy and 400 PE sell is recommended.
With Trump’s 26% tariff announcement and fears of a global slowdown, how should options traders hedge against event risk in the coming sessions—through index straddles, VIX-based strategies, or calendar spreads?
India VIX, also known as the fear index, is trading at 13.75, which, in my opinion, is on the lower side considering the domestic and global volatility we are currently seeing. I expect VIX to increase in the coming sessions. Hence, long butterflies or long debit spreads are advisable. In the current scenario, it is always wise to hedge overnight positions due to heightened gap-up and gap-down risks.
Any sectors you wish to bring into the limelight?
I remain positive on the banking sector. Even in the current market scenario, Bank Nifty appears stronger and more resilient than any other sector. Moreover, in the upcoming RBI policy meeting scheduled for April 7–9, 2025, there’s an expectation of a 25 bps cut in the repo rate, bringing it down to 6.25%—the first cut in nearly five years. This would provide a strong boost to the banking sector and support broader economic growth.
Any stocks within those sectors?
In private sector banks, we see further upside in HDFC Bank and ICICI Bank. Among PSU banks, we are positive on Bank of Baroda and SBI.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
