Investors jittery as US revises tariff heat; Sensex and Nifty end lower

Indian equity benchmarks declined on Tuesday after US President Donald Trump's renewed threat to impose additional tariffs on India over its oil purchases from Russia, and general caution ahead of the Reserve Bank of India's (RBI’s) monetary policy decision on Wednesday. The Sensex on Tuesday ended the session at 80,710, down 309 points or 0.4 per cent. Meanwhile, Nifty ended the session at 24,650, a drop of 73 points or 0.3 per cent. The total market capitalisation of BSE-listed firms declined by ₹83,000 crore to end at ₹448 trillion.

 

US President Donald Trump on Tuesday said he would raise tariffs on Indian goods over the next 24 hours in response to India's continuing purchase of Russian oil.

 

 

Trump's latest announcement comes a week after he announced a 25 per cent tariff on Indian imports, which is one of the highest for a major economy.

 

In a  CNBC interview, Trump accused India of fuelling the Russian war machine. The US President had earlier given an August 8 deadline for Russia to reach a truce with Ukraine and threatened secondary sanctions on countries that purchased energy from Russia. Ukraine's allies view the energy purchases as helping the Russian economy and easing pressure on the government to end its war, which is entering its fourth year. 

 

Meanwhile, India's external affairs ministry, in its response, stated that India began purchasing oil from Russia because traditional supplies were diverted to Europe following the start of the war, and the US encouraged such imports. Furthermore, the ministry stated that the targeting is unjustified and unreasonable, and that India will take all necessary steps to safeguard its national interests and economic security. The relations between India and the US are strained due to the imposition of tariffs after months of negotiations. Moreover, India has been miffed by Trump's claims to have ended its conflict with Pakistan this year.

 

Going forward, the trade negotiations with the US and the RBI's policy decision will determine the market trajectory.

 

"Investors are now awaiting the upcoming RBI policy decision, where the market has marginal expectations of a rate cut, in the near term. Currently, the preferences of investors are for domestic consumption-driven stocks and sectors holding limited volatility to external factors," said Vinod Nair, head of research at Geojit Investments.

 

The market breadth was weak, with 2,371 stocks declining and 1,672 stocks rising. ICICI Bank, which declined 1.3 per cent, was the biggest contributor to the Sensex decline, followed by Reliance Industries, which fell 1.4 per cent.

 

"The near-term down trend of Nifty remains intact, and the market is expected to slide down towards the 24,500-24,400 levels in the next few sessions. However, tomorrow's RBI's mid-quarter policy outcome is expected to show clear directions for the market. Immediate resistance is placed at 24,800 levels," said Nagaraj Shetti, senior technical research analyst at HDFC Securities.

 

Foreign portfolio investors were net sellers to the tune of ₹22.5 crore, while domestic institutions were net buyers  to the tune of ₹3,840 crore.