Nifty 50 Index forecast ahead of RBI interest rate decision

The Nifty 50 Index remained in a tight range as Donald Trump threatened a higher tariff rate on Indian imports to the United States. The blue-chip Indian index was trading at ¥24,700 on Tuesday, a range it has remained in the past few days.

A bet on TACO

The Nifty 50 Index has reacted mildly to an announcement by Donald Trump that he would announce higher tariffs on goods from India. His current tariff rate is 25%, although he has warned of more penalties.

Trump accuses India of being one of the highest-tariff countries in the world. He also accuses it of fueling the ongoing war between Russia and Ukraine by buying Russian crude, refining it, and then selling it globally.

These are all bad news, especially after considering the volume of trade between the US and India. The two countries trade worth over $120 billion annually, which may now be at risk.

The main reason why the Nifty 50 Index has not fallen sharply as expected is the rising hope that the United States will ultimately reach a deal with India. It is a bet on the concept of TACO or Trump always chickens out.

Trump's art of the deal recommends threatening of a major consequence or starting significantly high and then narrowing the outcome. He did that with China when he pushed tariffs to 145% and then reduced them after the first meeting in Switzerland.

Read more: Trump’s tariff threat looms over India’s Russian oil deals

RBI interest rate decision and earnings 

The next major catalyst for the Nifty 50 index is the ongoing earnings season that will show whether India companies are growing or not.

Some of the top companies that will publish their results today are Bharti Airtel, Adani Ports, and Britannia Industries.

The other top companies to watch this week are Bajaj Auto, Hero Motors, State Bank of India (SBI), and Tata Motors.

The Nifty 50 Index will also react to the upcoming RBI interest rate decision on Wednesday.

While analysts expect the bank to leave rates unchanged at 5.5%, there is a possibility that it will cut to cushion companies from tariffs. Besides, recent data shows that the Indian inflation has plummeted in the past few months.

The hopes of a rate cut explains why Indian bond yields have plunged. The ten-year yield dropped to 6.30% from last week's high of 6.4p%.

Nifty 50 Index analysis 

The daily chart shows that the Nifty 50 Index has been in a downward trajectory after hitting a high of ¥26,670 on June 30

It has formed the highly bearish head and shoulders pattern and moved below the 50-day moving average. The chart also shows that the index has formed a small bearish pennant pattern. Therefore, the index will likely continue falling as sellers target the next key support level at ¥24,000.

Read more: Trump’s final tariff list: 25% for India; reductions for Pakistan, Bangladesh