Stock market, Trump tariff: A knee jerk reaction; Gift Nifty promises a terrible Thursday?

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Trump tariff: Indian stock markets are likely to see a gap down opening on Thursday after the US President Donald Trump signed an executive order to add extra 25 per cent trade tariffs on India after it warned New Delhi of actions over its oil and energy deals with Russia. This took the total levy to 50 per cent from India. However, Gift Nifty recovered and showed a 50 points fall.

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The harsh treatment in terms of non-favourable and steep tariff rate by the US may lead to a knee-jerk reaction at Dalal Street today. India now faces the highest US tariff burden globally, tied with Brazil at 50 per cent. The carnage, however, is seen limited by some experts as Indian markets have seen worse and indices are already in oversold position.

“We expect the markets to fall by 1-2 per cent in a knee-jerk reaction, but most would expect a resolution of the same. Impact on GDP will be around 30-40 bps if these tariffs are sustained for a year,” said Dhiraj Relli, MD & CEO, HDFC Securities.

This could hit Indian export-oriented sectors—especially IT services, textiles, engineering goods, pharma, and auto components—and may trigger retaliatory tariffs from India, risking a broader U.S.–India trade dispute, he added. “Market participants will hope that negotiations will resolve the issue before the actual implementation of the duties.”

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Trump’s statement clearly indicates that he is just posturing to arm twist and carve the best possible deal in the interest of the US economy. Ultimately, he also knows that some midway solution has to be arrived at so that interest of both the negotiating countries are taken care of, said SBI Securities in its note.

“Indian markets are already under pressure due to the targeting of India by Trump and it’s not a totally unknown event for the markets. Hence, markets may open flat or with minor weakness,” it added. We reiterate that the street has already seen far worse conditions earlier this year and things are anytime better now. The only worrying part is weakening INR due to continuous FII outflow.”

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“We all know Trump can revise tariffs anytime,” market expert Advait Arora said on X. “Right now FII’s hold a 9:91 long-short ratio & they gotta cover it on every dip. Small knee jerk reaction might happen but no major downside. Markets look oversold,” said the founder of WealthEnrich in his post.

Responding to Trump’s 9-sectioned executive order, India called the decision ‘unfair, unjustified and unreasonable,’ and accused the United States of selectively targeting India for actions that are, in fact, being undertaken by several other countries-including US allies. “India will take all actions necessary to protect its national interests,” said New Delhi.

The imposition of additional tariffs may dent India’s economic growth and trim its GDP forecasts in the coming quarter. Economists and experts are weighing in for a 10-60 basis points (bps) cut in India’s economic growth in the wake of latest Trump tariffs.

Nachiketa Sawrikar, Fund Manager at Artha Bharat Global Multiplier Fund called it a sad day for US-India bilateral relationship. “The US consumer will pay a higher price for the pharmaceutical and jewelry exports. India will need to write-off about $50 billion of exports to the USA. That is a 0.1 per cent impact on India’s GDP. Indians will gladly pay that price as self respect is priceless,” he said.

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Morgan Stanley in its latest commentary, post the RBI policy review on Wednesday, said headwinds from adverse tariff-related developments may further weigh on India’s growth outlook. The view comes as Morgan Stanley’s global team expects a slowdown in global growth in 2025, with India growing seen moderating to 5.9 per cent by December quarter.

“This is a great time to build proper reform. Reduce red tape. Free the rupee. Cut down the unnecessary bits in labour laws. It will take time, of course, but in good times, it’s easy to ignore things. It’s the tough times that push us to clean shop,” said Deepak Shenoy, founder and CEO of Capitalmind AMC, on X.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.