Indian equities absorb Donald Trump's tariff shock better than peers

Sensex and Nifty bend, but don't break under the reciprocal import duties announced by the US

Indian equity benchmarks ended Thursday with modest losses, even as their global peers tumbled after US President Donald Trump announced across-the-board tariffs against US trade partners, sparing neither friend nor foe.

 

India’s equity market fared better amid hopes that the country may benefit from relatively lower trade tariffs. The Sensex ended the session at 76,295, down 322 points, or 0.4 per cent, while the Nifty closed at 23,250, shedding 82 points, or 0.4 per cent. The Sensex hit a low of 75,808 and a high of 76,494.

 

On Wednesday, the US President imposed a 26 per cent reciprocal tariff on India, though an annexure to the order put it at 27 per cent. However, the tariffs on India were less severe than those on most Asian peers. The unexpected exemption for the pharmaceutical sector is also seen as beneficial to India, which is a major exporter.

 

 

Trump announced a 10 per cent baseline tariff on all imports, along with country-specific taxes. The tariff estimates were modified to account for what the US considers currency manipulation and other taxes imposed by countries on US imports.

 

The imposition of tariffs sent stock markets across the world into a tailspin, with Japan’s Nikkei declining 2.7 per cent and the Hang Seng falling 1.5 per cent. The tariffs have raised concerns about the start of a prolonged global trade war, which could distress economies and stoke inflation.

 

Both China and the European Union vowed retaliatory measures, terming US tariffs a terrible blow to global trade.

 

Investors sought refuge in haven assets. The 10-year US bond yield ended at 4.02 per cent, the lowest level since October 2024. Meanwhile, gold hit a record intraday high of $3,168 an ounce. Brent crude fell 5 per cent to $71.4 a barrel amid fears of global economic distress. The dollar index declined 2.2 per cent to 101.5, its lowest since October 2024.

 

Equity investors across the world have been on tenterhooks for months since Trump won the US presidential election, worried about changes in US trade policy.

 

After his inauguration, Trump’s salvos on trade tariffs kept investors on edge. The US president has already imposed tariffs on the country’s major trading partners, including Mexico and Canada, as well as on steel, aluminium, and automobile parts.

 

“We are entering a rough period, and there’s no two ways about it. The silver lining is that oil prices have started correcting, which is good for India. Corporate balance sheets and banking system asset quality are in good shape. We are already in a cyclical economic downswing. Valuations, especially in the small and midcap space, are out of whack with reality. Largecap valuations are still in line with fair value. I don’t think India is in a better position than other countries. A flourishing global economy and trade were a route out of poverty, and that accelerator of economic growth has been taken away. The notion that we are better off than others is misplaced,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.

 

Going forward, investors are bracing for a period of negotiations between the US and other countries.

 

“If these measures push the US into recession, there will be a ripple effect everywhere. Affected countries could explore other markets, and there could be some dumping into India. India will have to reactivate its anti-dumping structure,” said U R Bhat, co-founder of Alphaniti Fintech.