Fresh tariff blow from US may drag benchmark indices further

Indian equities could extend their decline on Thursday after US President Donald Trump on Wednesday slapped a 25% tariff on imports from India, along with an unspecified penalty.

- Ram Sahgal & Srushti Vaidya

Stocks of textiles, pharmaceuticals, and automotive component companies—key Indian exporters—are likely to be hurt the most, said experts. However, they also expect the fall to be short-lived on hopes of a trade deal eventually being struck. India and the US are negotiating a bilateral trade agreement and the next set of talks are scheduled in August.

The benchmark Nifty, which fell 3.1% over the past four weeks to 24,837 last Friday, recovered marginally to 24,855.05 on Wednesday. The tariff announcement came after the markets closed and could result in investors taking fresh bearish positions. The market was expecting a 20% tariff. However, an additional 5 percentage point tariff rate along with an unquantified penalty “could result in a knee-jerk reaction”, said Swarup Mohanty, chief executive officer (CEO) of Mirae Asset Investment Managers, which manages %2 trillion. “But things will begin to stabilise sooner than later as a large part of the uncertainty is out of the way. It's a negotiating tactic and we could reach a deal soon.”