The Indian stock market is facing heightened volatility and growing losses following a major escalation in US-India trade tensions initiated by President Donald Trump’s recent tariff hike. Yesterday, August 6, President Trump signed an executive order imposing an additional 25% tariff on Indian goods, on top of an existing 25% raising the total duty to 50% for most Indian exports entering the US. The move, primarily targeting India’s continued purchases of Russian oil and its resale in the global market, signals a significant deterioration in bilateral trade relations and triggers broad economic concern in India.
Indian Stock Market Reaction
Immediately following the tariff announcement, Indian equity markets experienced persistent weakness. The benchmark Nifty 50 index slid below the 24,600 mark, ending at 24,574.20—a loss of 75.35 points (0.31%)—while the BSE Sensex closed at 80,543.99, down 166.26 points (0.21%). The market decline accelerated amid broader sectoral losses, with information technology, pharma, media, and FMCG sectors shedding 1–2%. BSE midcap and smallcap indices also retreated by 1% each, reflecting a risk-off sentiment across the board.
Foreign Portfolio Investors (FPIs) have remained net sellers for almost two weeks, further amplifying volatility. Domestically, institutional investors have also reduced positions, selling into rallies as they navigate both the direct impact of higher tariffs and the broader uncertainty around US-India ties.
GIFT Nifty and Market Signals
The GIFT Nifty, seen as a barometer of likely domestic market performance, registered losses, trading at 24,561—down approximately 0.3% during the day—and later signaling a further negative start for Indian equities with a drop of 62 points (0.25%) as Thursday’s trading session approaches. The sharp drop in the GIFT Nifty underscores concerns about sustained weakness and the threat of deeper corrections if trade hostilities are prolonged.
Indian ADRs’ Performance
Indian American Depositary Receipts (ADRs) on US exchanges reacted sharply to the tariff shock, with major names posting declines. Infosys slipped 0.62% to $16.10, Wipro fell 0.56%, and Dr. Reddy’s Laboratories dropped 1.79%. HDFC Bank declined modestly by 0.15%, reflecting cautious investor sentiment. Some ADRs such as ICICI Bank and Yatra Online bucked the trend, but the general sentiment for Indian companies listed in the US tilted negative.
Broader Implications and Market Outlook
Economic experts warn that, at a 50% tariff, Indian exporters face a significant disadvantage, especially compared to regional competitors like Bangladesh, Thailand, and Vietnam, who now face substantially lower import duties into the US. Analysts suggest the ongoing trade tension could cut as much as 40–50 basis points from India’s GDP growth in fiscal 2025–2026 if the tariffs persist.
Summing up, the Indian stock market is grappling with mounting losses fueled by Trump’s aggressive tariff hike. With Indian ADRs declining, the GIFT Nifty reflecting caution, and sectoral indices broadly weakening, the days ahead remain clouded by trade uncertainty and heightened global risk.
