Indian stock markets took a sharp turn on Thursday, falling nearly 1% following US President Donald Trump’s 26% tariff on Indian imports. The announcement of Trump’s 26% tariff on Indian imports has rattled investor sentiment, especially within the IT and automobile sectors, leading to widespread losses across major indices.
The Nifty 50 plunged by 0.80% to settle at 23,145.80, while the Sensex dropped 809.89 points to close at 75,807.55. This reversal comes just a day after the indices posted a modest rebound, ending a brief two-day losing streak. The India VIX, which measures market volatility, spiked by 0.35% in early trade, signaling heightened uncertainty.
During a Rose Garden address themed around ‘Liberation Day’, Trump laid out a sweeping tariff strategy meant to “make America wealthy again.” At the core of his new policy is a 10% baseline tariff on all imports to the US. However, select countries faced far harsher rates—Cambodia (49%), Thailand (36%), China (34%), and India (26%).
Trump justified the high tariffs by accusing these nations of exploiting trade imbalances and applying steep tariffs on American goods. Even close US allies were not spared: Israel (17%), UK (10%), Switzerland (31%), and Vietnam (46%). These enhanced levies take effect from April 9, following the general baseline introduction on April 5.
One of the hardest-hit sectors was information technology, which is particularly vulnerable due to its reliance on US-based clients. The Nifty IT index tanked nearly 4%, marking a new nine-month low. HCL Technologies led the downfall with a 3.36% drop. Infosys, TCS, and Tech Mahindra were also down close to 3%, while Persistent Systems stood out as the worst performer in the IT segment. The fear is that Trump’s 26% tariff on Indian imports could strain outsourcing demand and disrupt the US-India technology corridor.
Auto stocks were another casualty, reacting negatively to the 25% tariff on fully assembled vehicles imported into the US. Trump’s stance stems from his long-held belief that countries like India impose disproportionately high tariffs on American automobiles. Major automakers saw early losses. Bajaj Auto and Tata Motors both dropped more than 2%, while Maruti Suzuki, Mahindra & Mahindra, TVS Motor, and Hyundai India also traded in the red. Jaguar Land Rover, a Tata Motors subsidiary heavily reliant on the US market, is expected to take a hit.
Adding to the downtrend, Foreign Institutional Investors (FIIs) resumed selling. On Wednesday, FIIs offloaded equities worth Rs 1,538.88 crore, snapping a brief period of buying. In contrast, Domestic Institutional Investors (DIIs) remained net buyers, investing Rs 2,808.83 crore. This comes on the heels of a broader exodus: in March, net outflow stood at Rs 3,973 crore; February saw Rs 34,574 crore offloaded; and January experienced a massive selloff of Rs 78,027 crore. The selling pressure underscores investor concerns about Trump’s unpredictable trade strategies and their long-term impact on emerging markets like India.
The ripple effect of Trump’s announcement was felt globally. Nikkei 225 (Japan) fell over 3.4%. South Korea’s Kospi declined 1.9% after a 25% US tariff. Australia’s S&P/ASX 200 dropped 1.8%. Hang Seng (Hong Kong) slipped 2.7%. Shanghai Composite lost 0.5%, and Taiwan futures showed a 1.6% dip. Meanwhile, US futures plummeted—S&P 500 was down 3% and the Dow Jones dropped by 2%, reflecting broader fears of a potential global trade war revival.
The announcement of Trump’s 26% tariff on Indian imports has added a fresh layer of unpredictability to already fragile markets. With investors bracing for further global spillovers and policy retaliation, many experts suggest caution, especially for those heavily invested in export-dependent sectors. Ajay Bagga, a seasoned market analyst, advised investors to “wait this out,” highlighting the need to watch global developments closely over the coming weeks.
