Amid renewed global trade tensions and threats by Donald Trump to implement a 25% tariff on imports from India starting August 1, the Indian stock markets ended lower on Thursday. The move, partly aimed at punishing India for continuing energy and defence trade with Russia, rattled investor sentiment and led to a stormy trading session.
The benchmark BSE Sensex fell 0.36%, or 296.28 points, to settle at 81,185.58, while the broader NSE Nifty 50 was down 0.35%, or 86.7 points, to close at 24,768.35. Both indices opened sharply lower, attempted an intraday recovery, but succumbed to selling pressure toward the close.
Market Reaction: Volatility Defined the Session
Markets opened on a bearish note, with the Sensex losing as much as 0.96% and the Nifty shedding 0.86% in early trade. The indices attempted to reclaim some losses, with the Sensex hitting an intraday high of 81,803.27—up 321.41 points—and the Nifty touching 24,956.5. However, the gains were short-lived as sellers re-emerged on fears of fallout from the tariff announcement.
“Indian markets had a very tossed-up start, with fresh tariff threats dominating. Hence, starting the day on a pessimistic note, they tried for some strong recovery later but ended up surrendering to selling pressure by the close,” said Vinod Nair, Head of Research at Geojit Financial Services.
Sectoral and Stock-Level Impact
All sectoral indices closed in the red except for Nifty FMCG and Nifty IT. Nifty Midcap 100 recorded a loss of 0.93%, while Nifty Smallcap 100 fell 1.05%, again painting a picture of broad-based weakness.
The biggest losers among Nifty 50 constituents included:
- Adani Enterprises: –4.06%
- Tata Steel: –2.52%
- Sun Pharma: –1.95%
- Dr. Reddy’s Laboratories: –1.93%
- NTPC: –1.51%
“The tariff rate announced by Trump is harsher than earlier expectations, which has spooked equity markets, especially sectors like metals and pharma with higher exposure to U.S. markets,” said a market analyst at a domestic brokerage.
Economic Implications: What Does India’s GDP Stand to Lose?
Analysts and economists are revising India’s growth projections amid escalating trade tensions. SBI earlier estimated that a 20% tariff could lower GDP growth by 50 basis points. The impact of Trump’s 25% tariff could therefore be even greater.
Nomura has maintained a 6.2% GDP forecast for FY26 but points to a downside risk of 20–35 basis points, particularly in sectors such as:
- Gems & jewellery
- Textiles and apparel
- Smartphones and electronics
Bank of Baroda Chief Economist Madan Sabnavis said: “While the 25% rate would technically be enforced from August 1, there is still some room for negotiation. The impact will depend on how long these tariffs remain in place.”
The Reserve Bank of India, in its first-quarter projections, pegged FY26 GDP growth at 6.5%, now apparently at risk unless a deal is struck soon.
Tariffs as a Political Tool: Trump’s Motivation
President Trump’s move is seen not just as an economic decision but also as a geopolitical manoeuvre. He criticised India for continuing to purchase military equipment and energy from Russia despite the ongoing Ukraine war.
“India is one of the top buyers of Russian oil and weapons. At a time when the world is asking Russia to stop the killing, this is unacceptable,” Trump said in a strongly worded statement.
Former Finance Secretary S.C. Garg sharply criticised the move, calling it “sheer blackmail” and arguing that “this is no trade—it’s a pressure tactic.” Former WTO envoy Jayant Dasgupta also warned that the U.S. may impose even steeper penalties, including up to 100% tariffs under pending legislation aimed at curbing trade with Russia.
Diplomatic Backchannel: Room for Negotiation?
Despite the shock announcement, both sides are expected to engage in talks. A U.S. trade delegation is scheduled to visit India in mid-August for the 6th round of Bilateral Trade Agreement (BTA) discussions. India remains open to a comprehensive or interim deal covering mutually agreeable items.
“There’s a high chance that the 25% rate will be scaled down during talks. Similar patterns were seen during earlier tariff wars,” said an official familiar with the negotiations.
Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), said exporters are still waiting for clarity: “Even if it is 25%, we must assess how much of it the exporters or the buyers can absorb in the short term.”
Global Factors: Fed Decision and Foreign Outflows Weigh In
Adding to domestic worries was the U.S. Federal Reserve’s decision to hold interest rates at 4.25%–4.5%, triggering a fresh round of FII selling across emerging markets. Outflows from Indian equities further added to Thursday’s bearish mood.
What’s Next?
The tariff escalation by the U.S. could have a domino effect on India’s trade dynamics and diplomatic positioning. Since sectors like pharma, textiles, and IT have major exposure to the U.S. market, they are expected to face price pressures. For now, investors will closely watch reciprocal talks. Markets are likely to remain volatile over the next few weeks, with both economic and geopolitical tensions shaping the outlook.
FAQs
Q1. Why did the Sensex and Nifty fall today?
The fall was triggered by President Trump’s announcement of a 25% tariff on Indian imports starting August 1. Sectors exposed to U.S. trade, such as metals, pharma, and textiles, saw heavy selling.
Q2. What sectors are most at risk from the tariffs?
Sectors such as gems & jewellery, textiles, smartphones, and possibly pharma (if included) are expected to bear the brunt.
Q3. Will India’s GDP growth be affected?
Yes. Economists estimate a downside risk of 0.2%–0.35% to India’s FY26 GDP, depending on the duration and breadth of the tariff measures.
Q4. Is there a chance the tariff rate could be lowered?
Possibly. Diplomatic talks are expected in August, and analysts believe the 25% rate could be scaled back during negotiations.
Q5. How are global factors contributing to market volatility?
Apart from tariffs, the U.S. Fed’s decision to keep interest rates steady and continued foreign institutional selling have also dampened investor sentiment.
