Trump’s Tariff Storm: Nifty 50, Sensex slide nearly 2%

On Tuesday—the worst day for the Indian markets since 28 February—benchmark indices tumbled more than 1.5%, reflecting jitters around the upcoming announcement and leaving investors poorer by more than ₹3.4 trillion.

The S&P BSE Sensex dropped 1.8% to settle at 76,024.51, while peer Nifty 50 closed 1.5% lower at 23,165.70. After a sharp 14% correction, the markets are now down about 10% from their peak on 26 September last year.

Some experts are of the view that the market might see more volatility after the tariff announcements that are due today, but it is likely to be short-term with several positives on the horizon and with other news taking centre stage eventually.

Also read | Markets may wilt under US reciprocal tariff weight

Unease on the upcoming tariffs had sent several Asian markets crashing on Monday—Taiwan’s Taiex index had crashed 4.2%, Japan’s Nikkei 225 fell 4%, South Korea’s Kospi crashed 3%, and some others closed more than 1% lower compared to Friday. Indian markets were closed on Monday due to a public holiday. On Tuesday, though, these markets stabilised, with Taiex gaining 2.82%, Nikkei ending flat, and Kospi rising 1.62%, per data from Bloomberg.

Meanwhile, US Dow futures opened over 200 points lower on Tuesday, signalling a weak start for US stocks as markets brace for the upcoming tariff announcements.

Explaining the upheaval in the Indian markets on Tuesday, Aashish Somaiyaa, CEO of WhiteOak Capital AMC, said “There’s a lot of uncertainty swirling around Trump’s tariff announcement, and the market is already baking that in." Somaiyaa believes that global market jitters could still spill over into Indian equities even if India does not take an immediate hit from the tariffs.

Meanwhile, provisional data from BSE showed that FIIs (foreign institutional investors) net sold ₹5,901.63 crore worth of equities, while domestic institutional investors (DIIs) net bought ₹4,322.58 crore.

Also read | FIIs are betting on these small-cap stocks—should you?

While the severity of the FPI (foreign portfolio investor) selling witnessed since October has reduced over the past few days, and they have turned buyers on some days, the overall activity remains quite patchy, believes Milind Muchhala, executive director at wealth management company Julius Baer India.

“Probably the FPIs might want to see a slightly longer period of dollar stability and more concrete improvement in corporate profitability before they turn consistent buyers in the Indian equity markets," he said. He expects an improvement in FPI flows from the second half of 2025.

Taher Badshah, chief investment officer at Invesco Mutual Fund, noted that the markets have already reacted once, “but another round of reactions is expected after the big tariff announcement".

Not all gloom

Somaiyaa sees some short-term volatility over the next three to six months but points out a silver lining—the dollar has stopped appreciating, and the rupee is gaining strength. Plus, if the US economy starts slacking, the US Federal Reserve might cut interest rates, giving India's central bank Reserve Bank of India (RBI) some room to follow suit.

Invesco’s Badshah believes that once the impact of the tariff announcement is digested, the market will turn its attention to domestic economic growth, key indicators, and the upcoming monsoon season. Most importantly, the March earnings season will be crucial in determining whether the earnings downgrade cycle is over and if valuations have bottomed out.

Also read |Don’t blame Trump for all of the stock market’s problems

Badshah sees consumer discretionary, industrials, manufacturing, and some of the beaten-down financials (such as banks and non-banking financials) leading the charge in the recovery.

To be sure, Indian market valuations have become a bit more attractive, with the Nifty 50 currently trading at a price-to-earnings multiple of 21.88, compared to its five-year average of 23.95, according to Bloomberg data.

But tariffs will hurt

According to a Nomura report dated 28 March, the most limited and least impactful interpretation would involve merely matching the tariffs that other countries impose on the US. “If India’s tariff on imports from the US is 9.5%, and US’s tariff on imports from India is 3%, then the reciprocal tariff would be 6.5%," the report said.

The Japanese brokerage is of the view that India, Thailand and Brazil are among the five most exposed. Emkay Global Financial Services, too, feels that India could be one of the hardest-hit by the US’s broad country-level tariffs.

In a strategy report dated 25 March, the brokerage estimated that India could lose around $6 billion (0.16% of its gross domestic product or GDP) in exports to the US with 10% broad tariffs, a figure that could jump to $31 billion under 25% tariffs.

While the specifics of reciprocal tariff implementation remain unclear, Emkay believes that a broad country-level tariff is the most likely outcome, given the complexities around sector- and commodity-level tariffs.

Also read | Tariffs spark recession worries. Where to invest beyond the usual suspects.

According to Emkay, sectors like auto, pharma, and electronics are in a stronger position than anticipated, while apparel and gems/jewellery remain the most vulnerable. The firm has also pinpointed a few “easy wins" that could help offset the impact of tariffs, such as higher energy and defence imports, as well as lower foreign EV (electric vehicle) tariffs.

Tuesday’s moves

On Tuesday, the biggest sell-offs were seen in sectors like financial services, information technology, oil & gas, and consumable fuels. Major index heavyweights such as HDFC Bank, ICICI Bank, Infosys, Reliance Industries, L&T, and HCL Tech were the day’s biggest laggards.

To be sure, on Tuesday, midcaps and small-caps held their ground better than the market benchmarks. Nifty Midcap 100 slipped 0.9% to 51,229.60, and Nifty Smallcap 250 edged down just 0.5% to 15,030.10.

Also read | Stock market mayhem: Will history repeat itself?