Tuesday marked the fifth day of fall for domestic stock indices including Sensex and Nifty, with bigger cuts visible in smallcap and midcap pockets, as fears over US tariffs under the Trump administration intensified, with fresh 25 per cent tariffs announced on US steel and aluminium imports, without exceptions or exemptions. The recent moves are set to stoke inflationary pressure in the US and delay a likely shallow rate cut cycle there.
Sensex stood at 76,353.39 on Tuesday, down 958.41 points or 1.24 per cent. Nifty plunged 321.15 points or 1.37 per cent to 23,060.45. There was carnage on smallcap and midcap pockets, as seven stocks fall for every single rise. A total of 397 stocks hit their lower circuit limits, while 394 stocks were reeling at their 52-week low levels.
For now, Trump’s latest tariffs on steel and aluminium are seen hurting countries like Mexico, Brazil, South Korea and Vietnam more.
"The impact of these tariffs can put upside pressure on inflation. The US Fed chair’s upcoming testimony might offer some guidance on all these front, said Kranthi Bathini of WealthMills Securities.
The entire Sensex basket was trading in the red, with Zomato Ltd, Tata Motors Ltd, Power Grid Ltd and Larsen & Toubro falling up to 5 per cent. Kotak Mahindra Bank, Tata Steel, HUL, Bajaj Finserv, Adani Ports, UltraTech Cements and Sun Pharma declined over 2 per cent each.
Stocks such as Coal India Ltd, GAIL Ltd, MRF Ltd, Tata Motors Ltd, Varun Beverages Ltd, Gujarat Gas Ltd and Star Health hit their one-year lows today. Wockhardt, Vakrangee, KPI Green Energy Ltd and Jai Corp Ltd were among stocks hitting their lower circuit limits.
DBS Bank expects the questioning at Fed Chair Jerome Powell’s testimony to reflect partisan divisions. Republican senators will likely agree with Trump’s criticism that the Fed was not lowering rates fast enough but Democratic senators may likely express concerns about Trump’s policies including universal tariffs, tax cut extension, and deportation of illegal migrants. The bank sees the Fed delaying rate cuts to H2 2025, before keeping them steady at 4 per cent throughout 2026.
India & tariffs Nomura said India has been trying to avoid confrontation with the US. In the recently announced Budget 2025, it reduced import duties on products across electronics and textiles sectors, and also high-end motorcycles. India also offered the Trump administration an early political win by agreeing to take back over 100 illegal immigrants.
"It is also proactively considering reducing tariffs on over 30 items, including luxury vehicles, solar cells and chemicals. This week, Prime Minister Modi is visiting the US, where reports suggest a timeline to agree upon a “mini” trade deal could be proposed along with talks on defence cooperation, energy, immigration and H1-B visa issues," Nomura India said.
It said India is exploring options to strike a deal with the US to avoid higher reciprocal tariffs in the near term. Over the medium term, it is looking to engage with the US and attract more supply chains into the country.
Reciprocal tariffs Asian economies such as India, Thailand and China have higher relative tariff rates on US exports and are, thus, at risk of higher reciprocal tariffs. In comparison, developed Asia including South Korea and Singapore have FTAs with the US and are less at risk.
Trump has said that he would announce reciprocal tariffs on US imports from other countries this week. By definition, Nomura explained, reciprocal tariffs mean imposing the same tariff rate on imports from other countries as other countries impose on US exports.
For instance, if India imposes a 25 per cent tariff on US autos, then the US would impose a 25 per cent tariff on imports of autos from India. Trump’s objective of implementing reciprocal tariffs is to ensure fair treatment for US exports, which could indirectly also address US trade imbalances with partner countries, Nomura noted.
India impact India, Nomura said, stands out as having much higher relative tariff rates and is exposed to reciprocal tariffs.
This brokerage noted that te US accounts for 18 per cent of India’s total exports (2.2 per cent of GDP, as of FY24) and is India’s largest export destination, with the India-US trade surplus rising in recent years to a high of $38 billion in 2024.
What India exports to US Key exports include electrical, industrial machinery, gems & jewellery, pharmaceuticals, fuels, iron & steel, textiles, vehicles, apparels, and chemicals, among others, of which iron & steel and aluminium account for nearly 5.5 per cen of the total.
President Trump has called India “tariff king” in the past, and in his recent conversations with Prime Minister Modi, he has emphasised the need for India to procure more American-made security equipment and move towards “a fair bilateral trading relationship”.