Indian stock markets witnessed a massive sell-off today, with both Sensex and Nifty closing at three-month lows. The main reason behind this fall is the new tariffs imposed by the US on Indian exports, which have caused deep concern and volatility in the market. The second series of tariffs announced by the US government and the continued selling by foreign institutional investors (FIIs) pulled the market down.
New US tariffs and their impact
The root of this uneasiness lies in the executive order of US President Donald Trump, under which tariffs on a wide range of Indian exports have been doubled to 50%. The move is being implemented in two phases, the first phase of which came into effect on August 7, and the second phase will come into effect from August 27. This extraordinary decision has been taken in response to India’s continued trade of Russian oil.
This punitive tariff rate is one of the highest ever imposed by the US on any major trading partner, and is likely to have a severe impact on key Indian industries that are heavily dependent on the US market. The sectors most under pressure include textiles and apparel, gems and jewellery, seafood products, leather and footwear, and chemicals. Key sectors such as pharmaceuticals, energy and electronics have been exempted from these tariffs, which may provide some relief to the Indian economy.
Market Performance and Investor Sentiment
On August 8, the BSE Sensex closed 765 points (0.95%) lower at 79,857.79, while the NSE Nifty 50 closed 233 points (0.95%) lower at 24,363.30. Both the key indices have hit their lowest levels since May.
This decline was further deepened by the continuous selling by foreign institutional investors. FIIs have remained net sellers for the last ten sessions and have pulled out over ₹15,950 crore from the capital markets in August so far. This shows that there remains a lot of volatility and concern among global investors about the current environment. However, domestic institutional investors (DIIs) have provided some support, which helped to arrest the losses to some extent.
Government and industry response
The Indian government has strongly criticized the tariffs imposed by the US, calling them “unfair, unjust and disorderly.” The government has also made it clear that it is fully committed to protecting national interests. Prime Minister Narendra Modi, without naming the US, said that India will “never compromise” on the interests of its farmers and fishermen, indicating that the government is firm on its trade stance.
Amid the current tense atmosphere, however, some Indian officials remain optimistic that a solution can be found through diplomatic dialogue, as trade talks are still ongoing. A US delegation is expected to visit India later this month, raising some hopes of defusing the trade dispute.
