August 7, 2025 | New Delhi : Indian stock markets are expected to open flat on Thursday as investor sentiment takes a hit following a major move by the United States. The U.S. has announced an additional 25% tariff on Indian exports, effectively doubling the rate to 50%. This sudden decision has sparked concerns about worsening trade ties and potential long-term impacts on the Indian economy.

As of 7:05 a.m. IST, Gift Nifty futures were trading at 24,586, indicating the Nifty 50 would open near Wednesday’s close of 24,574.2. The dollar-rupee non-deliverable forwards also suggest the Indian rupee will remain largely steady.

Dhiraj Relli, CEO of HDFC Securities, noted that markets could initially dip 1-2% as a knee-jerk reaction. However, he expects that investors are hoping for a resolution soon. If the tariff hike persists over a year, it could shave 30-40 basis points off India’s GDP growth, he added.

Despite this news, the Reserve Bank of India has retained its GDP forecast at 6.5% for 2025, downplaying the immediate economic impact.

Investor Jitters and Foreign Outflows
Foreign investors appear to be reacting swiftly. So far in August, $900 million worth of Indian shares have been sold off, following a $2 billion outflow in July. The combination of weak corporate earnings and trade tensions has made investors cautious.

Max Wasserman of U.S.-based Miramar Capital said the tariff news could deter investments in Indian companies. "We’d definitely pause any investment plans related to India until we see how the situation develops," he stated.

Nilesh Shah, CEO of Kotak Mahindra AMC, warned that these developments could shake markets out of their “complacency.” A market correction, he said, seems inevitable if the new tariffs remain in place.

Sectors Likely to Be Hit Hard
The U.S. is India’s largest export market, accounting for nearly $87 billion in shipments in 2024. The new tariffs could impact several key sectors:

Textiles & Footwear: These labor-intensive sectors could face the brunt of the tariff hike.

Gems & Jewellery: While these could be affected, experts believe the industry may still pass on some of the additional costs to U.S. consumers, thanks to India's dominance in diamond cutting and polishing.

Oil Companies: Firms like Reliance Industries could be under pressure if India is pushed to reduce imports of Russian crude, potentially affecting profit margins for refiners and oil marketers.

However, not all sectors are equally exposed. IT services and pharmaceuticals are expected to remain relatively unaffected for now.

Market Performance So Far in 2025
India's benchmark indices, the Nifty 50 and Sensex, have posted gains of 4% and 3% respectively in 2025. However, they have lagged behind global peers, particularly the MSCI Emerging Markets Index, which is up by 15.7% this year.

What’s Next?
While the tariff announcement has rattled investors, many experts believe the situation could stabilize if both countries move quickly to negotiate. In the meantime, market participants are likely to stay cautious and monitor further developments closely.

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