Nifty, Sensex recover from Trump tariff blow; Here's what drove the rebound

Market experts say the recovery in Nifty and Sensex was driven by limited macroeconomic impact, strong domestic buying, and hopes for further negotiations

Indian stock markets shrugged off major losses after opening nearly 1 per cent lower on Thursday after US President Donald Trump slapped the country with a 25 per cent tariff. 

 

The Nifty50 fell as much as 220 points or 0.89 per cent to 24,635, while the Sensex fell 789 points or 0.97 per cent to 80,695. The midcap and the small-cap indices fell by 1.47 per cent and 1.59 per cent, respectively. Sectors from textile, auto, and oil and gas plunged on Thursday. 

 

However, as of 1:00 PM, both the Nifty and Sensex recouped all losses and were trading 0.18 per cent higher. Nifty Midcap and small-cap indices recovered some losses to trade 0.48 per cent and 0.33 per cent higher.  

 

   

The market breadth was, however, in favour of bears with 2,217 stocks declining on Thursday, on the BSE. 1,600 stocks advanced, while 175 remained unchanged.   FOLLOW STOCK MARKET TODAY LIVE UPDATES 

Trump said that India has tariffs that are “among the highest in the World," and are the most "strenuous and obnoxious non-monetary trade barriers of any country."  He further threatened additional penalties over India's energy purchases from Russia. 

What led the market recovery? 

Market experts say the recovery was driven by a combination of limited macroeconomic impact, strong domestic buying, and hopes for further trade negotiations.

 

"The bounce-back came sooner than many thought," G Chokkalingam, founder and chief investment officer at Equinomics Research, said. "The key reason is that India's goods exports to the US account for just 2 per cent of GDP. Even within overall exports, the US share is around 20 per cent, and not all of it will be affected."   

Another crucial factor supporting the recovery is that the US tariffs currently target only goods, not services, Chokkalingam said. "The IT sector, which is a major pillar of India’s export economy, hasn't been touched. If that were to change, markets would be far more concerned. For now, the risk is contained."

 

Experts also pointed to continued buying by domestic institutional investors (DIIs), who have been stepping in to support the market. Further, there is also growing hope that the 25 per cent tariff may not be the final word, Chokkalingam said. 

 

Investors were able to digest the news quickly after the markets gave a knee-jerk reaction in the morning, Kranthi Bathini, director - equity strategy at WealthMills Securities. "The initial selling pressure was absorbed, and buying interest emerged as the session progressed."  ALSO READ: FPIs selling in F&O hits 2-year high; but rollovers hint at optimism ahead 

From a longer-term perspective, Indian economic fundamentals remain intact and current tariffs are unlikely to impact the country’s overall growth trajectory, Bathini said. With strong liquidity in the system and a steady inflow of SIP (Systematic Investment Plan) money, domestic institutions have been actively buying over a series of sessions, he added. 

  ALSO READ: FPIs selling in F&O hits 2-year high; but rollovers hint at optimism ahead