Benchmark equity indices tumbled in early trade on Thursday, August 7, as investor sentiment took a hit following United States President Donald Trump's decision to impose an additional 25% tariff on exports from India, escalating trade tensions between the two countries.
The BSE Sensex dropped 335.71 points to 80,208.28 in the opening session, while the NSE Nifty fell 114.15 points to 24,460.05.
The decline comes a day after Washington doubled tariffs on Indian goods to 50%, placing India among the highest-taxed US trading partners. The move has raised fears of a prolonged trade standoff and its potential impact on India’s export-dependent sectors.
Gift Nifty futures were trading at 24,586 points as of 7:05 am, hinting at a flat-to-negative start for the broader market, close to Wednesday’s closing level of 24,574.2.
Despite the tariff announcement, the one-month dollar-rupee non-deliverable forwards (NDF) suggest that the Indian currency will likely open steady, with little change from its last close.
Experts have started flagging the possible long-term effects of the tariff escalation. “If tariffs persist for a year, the impact on India’s GDP growth will be around 30 to 40 basis points,” Dhiraj Relli, CEO of HDFC Securities, told Reuters.
{{/usCountry}}Experts have started flagging the possible long-term effects of the tariff escalation. “If tariffs persist for a year, the impact on India’s GDP growth will be around 30 to 40 basis points,” Dhiraj Relli, CEO of HDFC Securities, told Reuters.
{{/usCountry}}Before the tariff hike was made public, the Reserve Bank of India had retained its GDP growth projection for the financial year at 6.5%, brushing aside global uncertainties.
However, market veterans warn that continued friction between New Delhi and Washington could jolt investor confidence. “The doubling of tariffs, coupled with worsening bilateral ties, could shake markets out of their complacency,” said Nilesh Shah, CEO of Kotak Mahindra Asset Management Company.
The market now awaits further policy responses from both governments, with investors keeping a close eye on RBI's stance and any diplomatic outreach to defuse the situation.
Meanwhile, Asian shares climbed with US equity-index futures after Trump’s threat of 100% tariffs on chip exporters came with exemptions for companies like Apple Inc. that invest in the US.
MSCI’s Asian stock gauge advanced 0.8% while contracts for the S&P 500 and Nasdaq 100 gained 0.3%. Shares in Nvidia Corp. rose in after-hours trading while Samsung Electronics Co. gained 1.9% in Seoul. Taiwan Semiconductor Manufacturing Co. jumped 4.4%.
Oil inched higher after a five-day drop — the longest losing run since May — as investors tracked US efforts to punish buyers of Russian crude, and a diplomatic push by President Donald Trump to end the Ukraine war. Bonds dipped with the yield on 10-year Treasuries rising two basis points to 4.25% while a gauge of the dollar was little changed.
(With inputs from Reuters)