Donald Trump’s tariff impact on India’s stock market: Nifty50 and BSE Sensex saw a gap down opening on Thursday after the US President imposed a 25% tariff and additional penalty on India. But the market was quick to recover losses, rising over 700 points from the day’s lows. Why is the Indian stock market not crashing after Trump’s tariff announcement?The tariff implementation, starting August 1st, positions India as Trump’s main Asian focus, with rates significantly higher than those imposed on Vietnam (20%), Indonesia, and the Philippines (19% each).
Trump tariffs on India: Why is the stock market not crashing yet?
Market experts note that negotiations remain possible, whilst Foreign Institutional Investors have largely factored in the tariff impact, having already withdrawn approximately Rs 25,000 crore from equities during eight consecutive days of selling.Narendra Solanki, Head Fundamental Research – Investment Services, Anand Rathi Shares and Stock Brokers tells TOI, “On July 30th, the US imposed a 25% tariff on all Indian exports, putting $81 billion in trade at risk. The move is expected to squeeze margins in sectors like pharmaceuticals and textiles, with an estimated 30–50% of the tariff burden falling on Indian exporters and a potential drag of 0.3–0.4% on India’s GDP growth. However, any weakening of the rupee would partially offset the margin pressures of Indian exporters in rupee terms.”Also Read | Donald Trump announces 25% tariffs: Where does that leave India-US trade deal talks? What to expect“This announcement is a significant test of India’s strategy of balancing global relationships while protecting its economic interests. India may seek to de-escalate through dialogue, but it is unlikely to reverse course. In an increasingly multipolar world, neutrality is not passivity; it is a deliberate strategy to maximise room for manoeuvre,” he said.“The impact on markets today has been more or less on expected lines as partially similar outcomes may have been priced as deal negotiations remained non conclusive in the past week while the deadline approached. However the true nature of impact is also not known as clarity is still not there and things are still evolving. At the moment while the event is sentimentally negative the knee jerk reaction may not be warranted at this stage and underscores the need for India to diversify export markets and accelerate new trade agreements to reduce future vulnerabilities,” he added.According to Nomura’s Sonal Varma, “The announced higher reciprocal tariff rate of 25%, however, may be temporary, and might settle down lower. Unlike other countries, India is in the process of securing a detailed trade deal with the US. Most of the other countries have secured very rough-cut deals, with some agreements largely verbal. Indian government sources had previously suggested that an ‘interim’ deal was meant to be part of a more comprehensive trade deal that would take until end-2025 to agree upon,” said.India has adopted a more pragmatic stance by focusing on thorough assessment of trade agreements rather than rushing to meet strict deadlines, according to Varma, who emphasised that these discussions are ongoing and require substantial time.Also Read | ‘Trump frustrated with India trade talks…’: US President feels 25% tariff will ‘remedy’ the situation, says adviser; additional penalty for Russia trade ‘shortly’“The US trade delegation is set to visit India at the end of August as part of this process. Hence, the elevated tariffs announced by the US are unlikely to be permanent, in our view, although the best-case outcome would be tariffs in the 15-20% range,” the brokerage firm said.Dr. VK Vijayakumar from Geojit concurred, noting that whilst the tariff negatively impacts Indian exports and short-term economic growth prospects, it represents a typical negotiation strategy by Trump to secure advantageous agreements from India, likely settling at a tariff rate of 20% or below.“Nifty is unlikely to go below the support level of 24500. Investors can buy the dip focusing on domestic consumption themes, particularly segments like leading private sector banking names, telecom, capital goods, cement, hotels and select autos which have done well in Q1,” he said.Emkay’s economist lead Madhavi Arora provides a reassuring perspective: “The tariff will have little impact on India’s 2HFY26E earnings recovery trajectory, as high-weightage sectors such as financials, consumption, and technology are unaffected.”Regarding the 25% rate, she stated: “We believe the 25%+ regime is the worst-case scenario and the final bilateral deal could be reached with a lower tariff … .In any case, a meaningful correction is an opportunity to buy the market with consumer discretionary and industrials as the key sectors.”Also Read | ‘India-Russia can take their dead economies down together’: Trump’s new jab after 25% tariffs; issues warning to ex-Russian President
About the Author
