Trump's 25% Tariff Shock: What It Means For Indian Stock Markets
The stock markets are set to weaken on Thursday in reaction to Trump's tariff announcement; Know what experts say
Stock Market Today: The stock markets are set to weaken on Thursday in reaction to Trump's tariff announcement. The GIFT Nifty futures were down 129 points, or 0.52%, at 24,725 at the time of going to print.
'Markets will react negatively," said Nilesh Shah, MD, Kotak Mahindra AMC.
'Despite the unpredictable policy making of the US, the market was expecting a tariff deal to work out as long-term US-India strategic interests are aligned. Markets will hope for a 'TACO" trade if better senses prevail."
TACO stands for Trump Always Chickens Out.
Shares of companies in export-oriented sectors could be impacted the most on Thursday, Shah added.
In the wake of President Trump's announcement of a 25% tariff on Indian exports, investor sentiment is expected to shift toward a more cautious yet measured stance. According to Utsav Verma, Head of Research – Institutional Equities at Choice Broking, sectors such as textiles, pharmaceuticals, and automotive components—key contributors to India's export basket—are likely to bear the brunt in the short term. 'These sectors may see reduced investor interest initially," he said.
Market veteran Shankar Sharma emphasized that the broader weakness in Indian equities predates the U.S. tariff move. 'The Indian market isn't in a great position, and that has little to do with Trump's tariffs. It's more a function of domestic corporate earnings and structural issues. India has been one of the weakest performers globally in recent months," he observed.
Sharma added that while the rupee might come under some pressure, the impact of the tariff news on market sentiment would be limited. 'It's significant, but not earth-shattering," he said.
Meanwhile, Nirav Karkera, Head of Research at Fisdom, pointed to the IT sector as being particularly vulnerable. 'Among export-oriented sectors, IT is likely to feel the heat first, followed by steel, aluminium, and auto component companies. Pharmaceuticals and textiles—both heavily reliant on U.S. consumption—could also react sharply," Karkera said.
However, Feroze Azeez, Joint CEO, Anand Rathi Wealth Limited, stated that 'the announcement of a 25% tariff on Indian goods, while higher than anticipated, broadly falls within the 15–20% range that markets had been bracing for. In that sense, it is not entirely unexpected. What requires close monitoring is the structure of the additional penalty linked to arms and energy imports from Russia, which remains undefined at this stage. From a technical standpoint, this move could weigh on near-term export competitiveness and trigger currency volatility if sentiment deteriorates. That said, the overall trade and investment relationship between India and the US still has room for improvement and is not yet in a worrisome zone. The Indian market is currently being driven largely by domestic investors, and FIIs are almost 85% short. Therefore, a major sell-off is not expected. Some volatility is likely, any dips will be buying opportunities for investors with even 2-3 year time frames as we have already had a 10-month time correction."
The markets are likely to shrug off the US Federal Reserve's decision to keep the benchmark lending rate unchanged at the 4.25-4.5 percent mark for the fifth consecutive session in the July meeting. This move was largely priced in, with the CME Group's FedWatch tool indicating that 98 percent of market participants were expecting the Fed to stand pat.
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July 31, 2025, 07:49 IST
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