Trump tariff, stock market: Sensex, Nifty set for selloff? Gift Nifty sends ominous sign

The US president Donald Trump announcing 25 per cent tariff on India, along with a penalty for buying Russian crude oil & defence equipment, sent Gift Nifty lower by 190 points today, before some recovery was seen on the counter. At last count, Gift Nifty was trading 152 points or 0.61 per cent lower at 24,702 level, still hinting at a weak start for domestic stock indices--  the NSE Nifty and the BSE Sensex, on Thursday. The Trump announcement came amid delays in the US-India trade deal and reports suggesting a US delegation would come to Delhi for another round of talks on August 25.   

Dalal Street caught off guard  

"A trade deal with the US ahead of the August 1 deadline for reciprocal tariffs was seeming highly unlikely, but the US President Donald Trump’s announcement of a 25 per cent tariff has caught industry unaware, with concerns emerging around the proposed penalty and the relative competitiveness of Indian exports," said  Nachiketa Sawrikar Fund Manager Artha Bharat Global Multiplier Fund. 

Aditi Nayar, Chief Economist at ICRA said when the US had initially imposed tariffs, her rating agency had lowered its forecast of India's GDP expansion to 6.2 per cent for FY2026, presuming a tepid rise in exports and a delay in private capex.

"The tariff (and penalty) now proposed by the US is higher than what we had anticipated, and is therefore likely to pose a headwind to India's GDP growth. The extent of the downside will depend on the size of the penalties imposed," she warned.

Rupee weakness, FPI selloff 

Trump had earlier suggested that India could face tariffs of 20 per cent to 25 per cent, which had weighed down the rupee today. The domestic currency exhibited its most significant single-day decline since May 8, reaching a five-month low today. This sharp depreciation was primarily driven by increased month-end dollar demand and outflows from foreign funds, analysts noted.

On the other hand, FPIs were net sellers of domestic stocks to the tune of Rs 942.43 crore today, provisional data showed. This was the eighth continuous trading day of FPI selling in the cash market.

Friend India & trade barriers 

Calling India the friend of the US, Trump in a social media post said India's tariffs are too high, among the highest in the worst. He said the US has done relatively little business with India due to strenuous and obnoxious non monetary trade barriers. He also blamed India of buying majority of its military gears from Russia, calling India the largest buyer of Russia's energy, along with China, despite Russia's war on Ukraine. 

"India will therefore be paying a tariff of 25 per cent, plus a penalty for the above, starting August first," he said.       

Sawrikar said hopes are now pegged on the government being able to finalise the first tranche of the bilateral trade agreement in the coming months.

Trump tariff to hit manufacturing, jewellery

Kunal Chaudhary, Tax Partner at EY India said  the US could create short-term challenges for the electronics and manufacturing sectors particularly at a time when investment momentum has been strong, driven by supply chain diversification and strategic alignment between the two economies.

"While these tariffs could cause temporary uncertainty for cross-border investors and OEMs evaluating India as an export base, they also underscore the need for India to deepen its competitiveness through lower input tariffs, stronger trade access, and accelerated infrastructure execution," Chaudhary said.

Chaudhary said the current developments offer India a chance to reduce exposure to risks and emerge as a dependable, cost-effective alternative in the global manufacturing landscape. The upcoming trade negotiations with the US offer a path to restore balance, and if handled strategically, can even enhance India’s appeal as a long-term investment destination, he said.

"The Indian gem and jewellery sector, in particular, stands to be severely impacted. The United States is our single largest market, accounting for over $10 billion in exports—nearly 30% of our industry’s total global trade," said Kirit Bhansali Chairman at GJEPC.