Indian stock markets fell sharply on Tuesday, reacting to heightened global trade tensions and the Reserve Bank of India's (RBI) monetary policy decision. The Nifty 50 dropped by 0.61% to close at 22,401.35, while the BSE Sensex declined 0.45%, ending at 73,885.30. Broader market indices also took a hit, with both small-cap and mid-cap segments falling by 1.3%.

Twelve of the thirteen major sectoral indices recorded losses. Information Technology stocks saw a 2.8% slump, impacted by the United States’ newly announced duties on Chinese imports. Indian IT companies, which earn a significant portion of their revenue from U.S. clients, were particularly affected. The pharmaceutical sector also declined by 1.8%, after U.S. President Donald Trump revealed plans for “major tariffs” on drug imports.

The selloff mirrored global trends as Asian markets reeled from growing fears of a prolonged trade war. The MSCI Asia ex-Japan index dropped by 2.2%, and Japan's Nikkei 225 fell by 3.7%, highlighting global investor anxiety.

Amid this backdrop, the RBI announced a 25 basis point cut in the repo rate, reducing it to 6.00%. This marks the second consecutive rate cut as the central bank moves to support the domestic economy. The policy stance was also shifted from “neutral” to “accommodative,” indicating the RBI's willingness to introduce more easing measures if necessary.

All six members of the Monetary Policy Committee voted unanimously in favor of the rate cut. RBI Governor Sanjay Malhotra stated that while there are signs of economic recovery, growth remains below optimal levels. He added that the current inflation rate, which stood at 3.6% in February, offers space for further policy actions without breaching the central bank’s target of 4%.

The market response to the policy announcement was relatively muted. Bond yields dipped slightly, but the rupee and equity indices did not show significant post-policy movement. Analysts noted that the RBI's dovish tone could provide some relief against external headwinds, though the recent U.S. trade moves pose a fresh challenge.

The new U.S. tariffs are expected to pressure India’s economic growth forecast for FY 2025-26. While the RBI projects GDP growth at 6.7%, government estimates range between 6.3% and 6.8%. Economists warn that global uncertainty could dampen export performance and private investment.

As the situation evolves, investors and policymakers will continue to monitor both international developments and domestic responses closely. The RBI’s latest actions signal a proactive approach to maintaining economic stability amid growing global volatility.