Mumbai: Indian equities were jolted on Thursday morning as benchmark indices opened deep in the red, weighed down by Washington’s imposition of additional 25% tariffs on Indian imports. The sudden escalation in trade tensions came just a day after markets remained shut for a local holiday, intensifying the sense of shock when trading resumed. Within minutes of opening, the BSE Sensex was down over 600 points at 80,315, while the NSE Nifty 50 lost 180 points, slipping to 24,583. The fall marked the continuation of Tuesday’s steep selloff, when both indices had dropped by about 1% in their worst single-day decline in three months, as traders rushed to reposition ahead of the tariff enforcement.
The weakness was broad-based, reflecting a mood of caution that has settled over Dalal Street. Fourteen of the 16 major sectors were in negative territory, showing that the shockwaves from Washington’s move were felt across the economic spectrum. Heavily-weighted banking counters were among the worst hit, with HDFC Bank retreating 1.5%, while ICICI Bank and Reliance Industries slipped close to 0.9% each. Smaller companies fared somewhat better, though not immune, with small-cap indices shedding 0.2% and mid-cap indices dipping 0.1%. Analysts say such divergences indicate that investors are rotating into less risky assets while awaiting clarity on trade negotiations, but the persistent selling pressure underscores fragile sentiment.
Market watchers warned that the tariff escalation represents more than just a short-term shock. The United States raised total duties on certain Indian goods to 50%, citing New Delhi’s continued purchase of discounted Russian oil. This has raised concerns not just about trade volumes but about the long-term trajectory of US-India relations. Amr Abdel Khalek, emerging markets strategist at MRB Partners, noted that the combination of political strain and high valuations has left Indian equities exposed. “The rift in U.S.-India relations, coupled with demanding stock valuations, suggests that Indian markets no longer enjoy a clear advantage compared to their emerging market peers,” he observed.
Adding to the market gloom, foreign portfolio investors (FPIs) have been exiting Indian equities at the fastest pace in months. Data shows that overseas investors have offloaded $2.66 billion worth of shares so far in August, marking the highest monthly outflow since February. Analysts link this to tariff concerns, muted corporate earnings in the June quarter, and a recalibration of global capital flows amid shifting geopolitical alignments. Vikram Kasat, head of advisory at PL Capital, highlighted the structural risks: “The stakes go beyond tariffs. The real question is India’s integration into global value chains. Without a trade deal with the U.S., India risks not only reduced exports but also diminished foreign investment and slower job creation.”
Individual stock movements highlighted how fragile investor confidence has become. Shares of InterGlobe Aviation, the parent of IndiGo airlines, plunged 4.3% on reports that a co-founder had sold a stake at a steep discount, a move that traders interpreted as a sign of weakening confidence within the aviation space. On the other hand, Hero MotoCorp managed to stand out as a rare gainer, rising 1.5% after brokerage Jefferies upgraded the stock to “hold” from “underperform.” The upgrade was linked to optimism over proposed cuts in Goods and Services Tax (GST) rates, which could provide a timely boost to earnings across the automobile sector.
Looking ahead, analysts warn that volatility is likely to persist in the coming sessions as global investors monitor whether India and the United States can bridge their widening trade rift. With total duties now effectively doubled, export-driven industries face an uphill battle to maintain competitiveness. Meanwhile, domestic markets are also bracing for secondary effects in the form of higher inflationary pressures, potential weakening of the rupee, and slower foreign capital inflows. Until clarity emerges on the diplomatic front, traders expect Indian equities to remain under stress, with investors adopting a “sell on rise” approach rather than chasing momentum.