India's equity market experienced a significant sell-off following the Trump administration's imposition of an additional 25% tariff on Indian goods, raising the total levy to 50%. This move severely dampened sentiment, particularly for firms that derive a substantial portion of their revenue from the US.
The 50% duty on approximately $45 billion worth of exports is expected to adversely impact India's export economy and could lead to widespread job losses in key labour-intensive sectors such as textiles, gems and jewellery, and leather. The sentimental impact of this development is believed to be highly negative from the market perspective.
The equity market benchmark BSE Sensex has fallen more than 1,500 points in two sessions with investors losing a massive Rs 10 lakh crore. On Thursday, the Sensex ended at 80,080.57, down 706 points or 0.87%, while the NSE Nifty50 dropped 211 points or 0.85% to 24,500.90. Broader markets underperformed, with the Nifty MidCap and SmallCap indices declining 1.3% and 1.5%, respectively.
“The last two sessions' sharp decline can be attributed to the implementation of the 50% US tariff on Indian goods, which has heightened worries about India's export competitiveness and trade relations. While domestic institutional investors (DIIs) provided some support by stepping in as net buyers, the persistent FII outflows amplified the impact of the US tariffs, leading to a broad-based selloff,” said an analyst at Bajaj Broking.
After losing Rs 6 lakh crore in the previous trading session, investors lost about Rs 4 lakh crore on Thursday as the overall market capitalisation of BSE-listed firms dropped to Rs 445 lakh crore from Rs 449 lakh crore. Foreign institutional investors (FIIs) continued their rampant selling streak. After offloading equities worth Rs 6,516 crore in the previous session, their net sales stood at Rs 3,592.71 crore on Thursday.
“The steep 50% U.S. tariffs will hit India’s textiles & apparel, gems & jewellery, marine (shrimp), leather & footwear, the hardest, given their heavy reliance on the U.S. market. On the policy front, the government extended the import duty exemption on cotton until December, providing relief to the garment industry impacted by higher US tariffs,” said Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services.
Among sectoral indices, except consumer durables, all other indices ended in the red, with bank, IT, realty, FMCG and telecom plunging more than 1% each. The biggest losers in the Nifty50 pack included Shriram Finance, HCL Technologies, TCS, Power Grid Corporation, and Infosys, while Titan Company, L&T, Coal India, Asian Paints, and Hero MotoCorp were among the gainers.
