Sensex, Nifty tumble as US slaps additional tariffs on Indian goods

Indian markets logged their worst fall in three months after the US imposed additional tariffs of up to 25 per cent on Indian exports, dragging Sensex and Nifty sharply lower

Indian equities recorded their steepest fall in three months on Tuesday after the US government confirmed the imposition of additional tariffs of up to 25 per cent on Indian exports, effective Wednesday. 

The Sensex closed at 80,787, down 849 points or 1.04 per cent, while the Nifty ended at 24,712, slipping 256 points or 1.02 per cent. This was the sharpest single-day decline for both indices since May 20. The total market capitalisation of BSE-listed firms shrank by ₹5.6 trillion to ₹449 trillion. 

The rupee also extended its losing streak for a fifth straight session, closing at 87.69 against the US dollar. Government bonds recovered all intraday losses by the close, on the back of short covering, dealers said. 

 

The US Department of Homeland Security issued a notification confirming that levies on Indian goods could rise as high as 50 per cent from Wednesday. Earlier, President Donald Trump had indicated plans to double duties in retaliation for India’s continued purchases of Russian oil — a move Washington believes undermines its efforts to curb Moscow’s war economy. Despite multiple rounds of negotiations, New Delhi’s attempts to cap the tariff hike at 15 per cent failed. 

Investor sentiment was already under strain from muted second-quarter earnings and persistent foreign portfolio investor (FPI) outflows. FPIs have pulled out ₹23,255 crore so far in August. 

FPIs were net sellers worth ₹6,516 crore on Tuesday, the highest since May 20. 

The heavy FPI selling was due to the latest MSCI index rebalancing. However, the effect of selling was mitigated by domestic institutional investors (DIIs) buying. DIIs were net buyers worth Rs 7,060 crore their highest buying since August 8. 

In response, the Indian government is considering tweaks to the goods and services tax (GST) structure to spur consumption and cushion the tariff impact. 

“Markets had already priced in the possibility of 50 per cent tariffs, but there was faint hope of a reversal. That disappointment triggered knee-jerk selling. With clarity now emerging, the likelihood of major corrections ahead is limited,” said Amabreesh Baliga, independent equity analyst. 

Vinod Nair, head of research at Geojit Financial Services, said persistent rupee weakness is putting pressure on FPI inflows.

"Investors will watch how the government responds, particularly through GST revisions and relief for tariff-hit industries. Selling was broad-based, except in FMCG stocks, which gained on expectations of stronger consumption,” said Nair. 

The yield on the benchmark 10-year government bond rose to 6.66 per cent during the day on account of heavy supply at the state bond auction but settled at 6.60 per cent, unchanged from Monday. 

Looking ahead, traders will track the US Federal Reserve’s September policy meeting, developments in the Russia-Ukraine war, and the prospect of further US trade action against India. 

Market breadth remained weak, with 2,973 stocks declining against 1,155 advancing. Blue-chip heavyweights such as Reliance Industries (-1.95 per cent) and HDFC Bank (-0.9 per cent) were among the biggest drags on the Sensex.