Traders monitor stock movements as Sensex and Nifty fall after U.S. tariff draft hits Indian market sentiment (Freepik)
On Tuesday saw tentative beginnings on India's equity markets. Their collective fate was decided on rumblings through the global trade environment when Washington released a draft notification of its confirming an additional 25% tariff on Indian imports effective August 27. This announcement sent alarm bells among potential investors and reversed benchmark indices into the red.
During initial trade, the BSE Sensex fell by 606.97 points or 0.74% at 81,028.94, while the NSE Nifty fell by 182.25 points or 0.73% at 24,785.50. The market's downturn was accompanied by foreign fund outflows and weakness across most Asian peers.
ALSO READ: How Dream11 Plans to Survive After Losing 95% Revenue Due to Gaming Ban
Noteworthy laggards included Sun Pharma, Tata Steel, Adani Ports, ICICI Bank, Bharti Airtel, Power Grid, Bharat Electronics Ltd, HDFC Bank, NTPC and Tata Motors, while only Hindustan Unilever and TCS managed to stay in positive territory. The rupee fell too, slipping by 22 paise, to trade at 87.78 per US dollar during the early hours.
According to a draft order of the U.S. Department of Homeland Security, these tariffs will be levied on Indian goods 'entered for consumption' only after 22 August 2004. This legislation which is being tagged as Washington's response to the threats by the Russian Federation effectively leads India into falling out of the overall fallout from geopolitical winds.
The implications for exporters in India are gut-wrenching. Analysts warned that nearly all exports to the United States worth approximately $86.5 billion may be rendered commercially unviable if such high tariffs were imposed. Prashanth Tapse of Mehta Equities called this the biggest headwind the Indian markets would face in the near term.
ALSO READ: Elon Musk Sues Apple and OpenAI Alleging AI Competition Thwarting
The announcement prepares to weigh down already weakened market conditions, whereby foreign institutional investors sold their shares worth ₹2,466 crore on Monday. On the global front, the Nikkei in Japan, Kospi in South Korea and Hang Seng in Hong Kong traded lower, though the SSE Composite of Shanghai continues to show some strength.
Experts remain cautiously optimistic despite the turbulence. "Continuous strong domestic buying by institutions has countered FII selling for quite sometime, which has kept markets from slipping into deeper corrections," VK Vijayakumar, Geojit Investments, said. "Liquidity continues to be the bedrock of India's market resilience," he observed, pointing out that continued inflow from domestic investors cushions shocks.
At the macroeconomic level, RBI governor Sanjay Malhotra has hinted that policy measures will be considered if US tariffs threaten India's growth trajectory. Brent crude, a major global benchmark indicator, traded slightly lower at USD 68.47 per barrel on energy fronts.
Monday's closing high of Sensex above 81,600 and Nifty near 25,000 was reduced within hours of announcement. Yet the overall market sentiment remains that though tariffs are likely to create some ripples, deep liquidity and investor confidence in India should help to cushion the long-term impact.
ALSO READ: Dow Trades Down, GIFT Nifty Indicates a Gap-up Tomorrow
