Markets withstand US tariff shock, end marginally lower after volatility

Sensex and Nifty dip slightly as investors brush off tariff threats, Fed rate hold; FMCG outperforms while metals, pharma, oil & gas see sharp cuts

The announcement of higher tariffs and accompanying penalty threats did little to shake domestic equity markets, with benc­hmark indices finishing the session only marginally lower. Although the Sen­sex and Nifty both plunged nearly a per cent in early trading, they managed to claw back all their losses at one stage before slipping back into the red later in the day.  The Sensex closed at 81,186, down 296 points, or 0.4 per cent, while the Nifty 50 ended at 24,768, a decline of 87 points, or 0.35 per cent. At the day’s low, the Sensex had dropped as much as 787 points, or 0.96 per cent.  Experts attributed the market’s resilience to the limited reliance on exports among companies with considerable weight in the benchmark indices. Investors also remained optimistic that the tariff threats were largely a bargaining ploy, expecting the final rates to be lower once India-US negotiations conclude.  US President Donald Trump on Wednesday proposed a 25 per cent tariff on Indian goods and threatened unspecified penalties for energy and defence deals with Russia. He added, however, that trade talks with India were still ongoing. 

  “The tariff will have little impact on the second half of 2025-26’s (FY26’s) earnings recovery trajectory, as high-weight sectors such as financials, consumption, and technology are unaffected. There may be a short-term selloff, given the market’s fragile state: weak earnings momentum in the first quarter and little valuation comfort, with most indices trading at their long-term averages,” said a note by Emkay.  “The announced reciprocal tariff rate of 25 per cent may, however, be temporary and could settle lower as negotiations continue after August 1. Still, the best-case outcome appears to be tariffs in the 15–20 per cent range, which is disappointing considering India’s more advanced stage of negotiations. We maintain our FY26 GDP growth forecast at 6.2 per cent but flag a downside risk of about 20 bps,” Nomura said in a note.  The India Vix climbed 3 per cent as traders absorbed the US-India trade developments and the US Federal Reserve’s (Fed’s) rate stance. On Wednesday, the Fed held rates steady at 4.25–4.5 per cent despite pressure from Trump for a large cut.  Overall market breadth was negative, with 1,602 stocks advancing and 2,416 declining on the BSE.   The Nifty Midcap 100 and Nifty Smallcap 100 indices both fell by around a per cent each.