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Domestic stock markets are holding firm even as the July 9 deadline approaches for the new US tariff rates — ranging from 10 per cent to 50 per cent — announced by US President Donald Trump on April 2.
The tariffs, paused for 90 days to allow for bilateral trade negotiations, have sparked cautious optimism among investors who foresee an extension or a favourable US-India trade deal.
The benchmark Nifty 50 index last ended at 25,542, less than 3 per cent below its record closing of 26,179 on September 27, 2024. From this year’s low of 22,162 on April 7, the Nifty has rallied more than 15 per cent.
Amish Shah, head of India research at BofA Securities, said, “Markets are fully pricing in an imminent India-US trade deal, making any delay or disappointment a major risk.”
Nimesh Chandan, chief investment officer at Bajaj Finserv Mutual Fund, described the potential for an extension as “kicking the can down the road”, as inking trade agreements within a short period is challenging. He, however, believes India will be the least impacted by US tariffs compared to other nations.
Analysts are more sanguine also because of the nature of India’s exports to the US, which are predominantly services like information technology and medical services — likely to be exempt from tariffs.
U R Bhat, cofounder of Alphaniti Fintech, said, “Commodity exports are not a large portion of the listed market. Also, as pharmaceutical exports feed into the US public health system, tariffs on these could raise US healthcare costs, making them less likely.”
Bhat also noted that Trump’s rhetoric has been less aggressive towards India compared to China, Japan, or Europe.
Despite US tariff uncertainty, emerging markets’ bonds, stocks, and currencies logged strong performance during the first half of calendar 2025. Market players attribute the gains to rising investor demand for non-US assets.
According to Bloomberg, an index for emerging market (EM) debt has gained over 11 per cent this year — its best performance in the first six months of any year since 2016. The EM index has rallied almost 14 per cent, double the advance in the S&P 500.
Anand Radhakrishnan, managing director at Sundaram Asset Management Company, believes the risk of tariffs impacting the market has reduced unless there is another major reversal in stance.
“Global markets, including India, expect a moderation of stance on the tariff side, considering the US central bank is itself saying tariffs can be inflationary and therefore they will not cut rates. Whereas the political administration may want to soften rates. So it does look like, at the margin, the stance may be softened with respect to tariff negotiations,” he added.
Experts don’t rule out an increase in market volatility as the July 9 deadline nears. Investors are keenly eyeing signs of an extension or a breakthrough in US-India trade talks, with markets poised to react sharply to any developments.
“If tariffs are imposed, markets will correct, though the correction may not be deep. An agreement or extension could trigger a rally, which could see domestic indices reclaiming September highs, driven by strong domestic liquidity,” said Ambareesh Baliga, an independent equity analyst.
Experts said limited direct exposure to US trade, which accounts for only 2 per cent of India’s gross domestic product (GDP), can protect the market from a sharp downside.
In an interview with Business Standard last month, Ridham Desai, managing director at Morgan Stanley India, said, “Slower global growth, driven by US trade policies, will indirectly affect India, as 20 per cent of its GDP relies on global engagement.”
Desai added that global economic deceleration has led Morgan Stanley to revise India’s earnings estimates downward.
Shah of BofA highlighted the 96 per cent correlation between the Nifty and the S&P 500, suggesting that a correction in the US market could also have a ripple effect on India.
