Indian markets under strain as US tariffs spark investor nervousness
Export-oriented sectors bore the brunt, though pharmaceuticals, smartphones, and energy stocks were relatively insulated from the initial fallout
The Indian stock markets have recently witnessed a sharp correction, with the Sensex shedding around 550 points and the Nifty sliding below the 24,550 mark. The immediate trigger was the imposition of fresh 50 per cent tariffs by the United States, a move that effectively doubled existing duties on Indian exports, particularly targeting sectors such as textiles, leather, gems and jewellery, marine products, chemicals, and auto components.
These punitive levies are widely seen as a response to India’s ongoing purchases of Russian oil, placing Indian exporters among the highest-taxed in the US, well above competitors such as China, Vietnam, and Bangladesh.
Thursday’s trading session was particularly volatile. The Sensex tumbled over 600 points in early trades, hovering near 80,200, while the Nifty fell approximately 173 points, touching 24,539 at its low.
Export-oriented sectors bore the brunt, though pharmaceuticals, smartphones, and energy stocks were relatively insulated from the initial fallout. Investor sentiment was further dented by foreign fund outflows and currency fluctuations, creating a perfect storm of pressures on the domestic market.
Despite the turbulence, market participants appeared cautious rather than panicked. Analysts suggest that the steep tariffs may be a transient hurdle rather than a structural blow.
Dr VK Vijayakumar of Geojit Financial Services noted that ongoing trade discussions between India and the US hint at a potential easing, and that the market is beginning to price in the short-term nature of these measures.
Profit-taking from earlier gains, especially those driven by optimism around GST reforms, added further downward pressure. The US tariffs also resulted in the cancellation of scheduled visits by US trade representatives to New Delhi, highlighting the tense diplomatic and trade environment.
The confluence of these factors such as tariff imposition, foreign investor outflows, global market cues, and currency movements have eroded significant market capitalisation within days.
On 28 August, the Nifty 50 managed to limit losses to just under 1 per cent, trading above the psychologically important 24,500 level and hitting an intraday low of 24,507.
Observers interpreted this modest resilience as an indication that the market may already be discounting the impact of the US tariffs, potentially signalling a near-term bottom.
Any positive news on the trade front could provide a fresh impetus for recovery.
Economists caution that uncertainty remains. Radhika Rao, Senior Economist at DBS Bank, warns that if high tariffs were to extend across half of India’s export basket, growth could be curtailed by roughly 1–1.2 percentage points.
Pankaj Pandey of ICICI Securities noted that India’s dominance in cotton and cotton-based textiles makes it challenging for the US to quickly replace Indian supplies, suggesting that some adjustment in supply chains may occur over time.
While the current tariffs affect a limited set of sectors, the broader market remains vulnerable to other risks, including heavy foreign capital outflows, valuations that outpace earnings growth, and subdued expectations for earnings revival in the coming quarters.
Analysts remain cautiously optimistic that the situation is unlikely to worsen dramatically, but the market’s ability to navigate these headwinds will hinge on the pace and outcome of ongoing trade negotiations.