The stock markets are in a wait-and-watch mode over US President Donald Trump’s tariff moves on India. Trump on Wednesday announced a 25$ additional tariff rate on India for its crude oil trade with Russia. This doubles the tariff rate on India from 25% to 50%. While the base line 25% rate is effective August 7, the additional rate will kick in from August 27.
According to an ET report, investors remain hesitant to deploy additional capital, awaiting either a US-India trade agreement or a market correction on Dalal Street that would present buying opportunities.
Donald Trump’s 50% tariff on India: What does it mean for the stock market?
Despite the Sensex showing a relatively modest decline on Thursday, indicating partial market adjustment to higher tariff expectations, market experts caution that export-oriented stocks may face significant pressure, with uncertainty likely to continue for several months.
The US tariffs on Russian crude imports have reached levels that Nomura analysts compare to trade restrictions. The proposed 50% rate exceeds China's by 20% and Pakistan's by 21%, potentially affecting multiple export sectors with substantial dollar value.
"This is a tough period to navigate for investors," warns Seshadri Sen from Emkay Global. "The terms of the final trade deal could still be considerably different, though a worst-case, highly damaging scenario has presented itself."
Industry-specific impacts are being assessed systematically. Sen identifies key vulnerable sectors: "The most-impacted sectors are textiles (Gokaldas/Kitex), Chemicals (Camlin, Aarti and Atul), and Auto Ancs (BHFC/Suprajit/Sona BLW), with direct export exposure to the US."
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Donald Trump’s 25% additional tariff on India: What are ‘secondary tariffs’ and how do they differ from ‘secondary sanctions’? ExplainedThe potential consequences are highlighted in Nomura's assessment: "If effective, the steep 50% tariff would be similar to a trade embargo, and will lead to a sudden stop in affected export products. The lower value addition and thinner margins across a number of industries (textiles, gem & jewellery) could jeopardise operations, especially of smaller firms that will struggle to compete."
Several crucial sectors direct 30-40% of their worldwide exports to America. The proposed tariff increase poses a significant challenge for textile, gems & jewellery, and leather industries, which typically operate with minimal profit margins.
SBI Securities has identified potential risks for Indian firms operating American brands. The brokerage advises against investing in US brand franchises within India, citing possible swadeshi movement resurgence and American product boycotts. They specifically identify Jubilant Foodworks (Dominos, Dunkin Donut), Westlife (McDonald's), Devyani International (Burger King), Varun Beverages (Pepsi), and Sapphire Foods (KFC, Pizza Hut) as susceptible to increased selling pressure.
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2x Tariffs on India a 'warning' to China which may also face the same, says Donald TrumpAditya Birla Sun Life AMC's Mahesh Patil notes the similarity with Brazil's situation, stating: "We are now at par with Brazil, which provides a blueprint, it saw a 6-7% fall from the peak before recovering in local terms."
The depreciation of the rupee, despite its challenges, presents an unexpected advantage. "The immediate casualty is the INR, which will take the brunt—this will provide some respite for exporters. Counterintuitively, a fall in the INR (once it stabilises) is positive for local earnings, and hence equities benefit with a lag," Patil elaborates.
As export-oriented sectors face pressure, investment focus shifts to domestic consumption segments. SBI Securities advises investors to concentrate on "domestic-focused businesses like Cement, Hotels, Telecom, New Age Businesses, EMS players, Auto/Auto Ancillaries, Hospitals, Defence/Railways, and Alcoholic Beverages."
Ajay Sen from Emkay Global expresses confidence in India's fundamental strength: "We see the broader economy staying resilient and remain convinced of a 2HFY26 consumption-led recovery. We would look through any near-term volatility caused by this and buy a substantial dip (of more than 5%)."
What should investors do?
Market analysts view the current crisis as an advantageous period for thoughtful investors. Sen outlines a survival approach that states: "Buy the dip if the market correction exceeds 5% from here. Valuations would then be comfortably below the long-term average, and the direct impact on the listed universe's earnings is negligible."
Offering a measured perspective, Dr. V.K. Vijayakumar of Geojit Financial Services notes: "The market is unlikely to panic, but weakness will continue in the near term. Since uncertainty is high, investors should adopt a cautious approach."
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Donald Trump doubles tariffs on India: Gems & jewellery industry calls it 'doomsday'; looks to shift manufacturing to low tariff nations like UAEOne's investment decisions should align with personal time horizons and risk tolerance. Santosh Meena of Swastika Investmart provides guidance for extended-term investors: "This development is part of ongoing global trade tensions and shouldn't distract from India's long-term growth potential. But short-term traders should exercise caution."
For investors focused on extended periods, analysts maintain positive outlooks. The Indian domestic consumption narrative remains strong, with sectors like IT, pharmaceuticals and electronics currently excluded from tariff provisions.
As highlighted by Patil: "Any knee-jerk correction in the market would be a good opportunity to increase allocation to equities, as the macroeconomic outlook and long-term fundamentals of India are fairly strong."
With 21 days remaining until tariff implementation, whilst markets currently show hesitation, those who can see beyond present uncertainties might recognise the beginnings of future market growth.
(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
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