Trade Setup for April 2: U.S. tariff decision to drive market sentiment

Indian equity markets kicked off the financial year 2025-26 on a weak note, with benchmark indices declining 1-2% as investors remained cautious ahead of U.S. President Donald Trump’s reciprocal tariff announcement scheduled for April 2. Analysts believe the nature of these tariffs will determine the market's near-term trajectory. If Trump announces milder-than-expected tariffs, a rebound led by export-driven sectors such as pharmaceuticals and IT could follow. However, harsher measures could deepen the market correction.

Market Recap: A Volatile Start to FY26

The Nifty 50 index exhibited sharp weakness, erasing early gains and plunging 429 points from the day’s high of 23,565 to close at 23,136. The index also breached the critical 200-day EMA support level, ultimately closing 354 points (1.5%) lower at 23,166. Broader markets outperformed, but key sectors, including realty, IT, and financials, saw heavy losses.

HCL Technologies led the declines, falling 4%, followed by Bajaj Finserv and Bharat Electronics. ICICI Bank and HDFC Bank also saw selling pressure, shedding 2-3% each. Bharat Electronics Ltd. (BEL) dropped 3% after missing its FY25 order inflow guidance, despite exceeding revenue expectations.

Key Market Indicators & Global Trends

Gold Prices: Safe-haven demand pushed gold to a new record of $3,120 per ounce.

U.S. Dollar Index: The index climbed to 103.9, reflecting investor caution ahead of the tariff decision.

Nifty Bank: The index closed at 50,827.50, down 1.43%, forming a bearish candle on the daily chart.

Technical Outlook: Crucial Support Levels in Focus

Nagaraj Shetti of HDFC Securities sees the current market weakness as a healthy correction after a strong rally, expecting Nifty to find support around 23,000 before rebounding. Immediate resistance is at 23,400. Rupak De of LKP Securities warns that a decisive breakdown below 23,115 could trigger a deeper correction, while resistance at 23,250 remains a key breakout level for bullish momentum.

Rajesh Bhosale of Angel One notes that Nifty has retraced 38.2% of its recent rally, testing crucial support near 23,100, aligned with the 20-day and 50-day EMAs. Holding this level is critical, as a breach could drag the index toward the 22,900-23,000 range.

For Nifty Bank, Om Mehra of SAMCO Securities highlights that the index has slipped below the 23.6% Fibonacci retracement level at 51,000, with the next support at 50,390. Resistance is seen at 51,400, but wider swings are expected as markets brace for tariff-related volatility.

Market Direction Hinges on Tariff Announcement

The upcoming U.S. tariff announcement remains the key event shaping market sentiment. Should Trump opt for lenient trade measures, export-focused industries may lead a recovery. Conversely, aggressive tariffs could trigger further market declines. Investors are advised to stay vigilant and closely monitor global developments before making trading decisions.