MUMBAI: Indian shares are poised for a muted start on Thursday after the United States imposed an additional 25% tariff on exports from the South Asian nation, sparking investor concerns over the potential economic fallout from souring relations.
Gift Nifty futures were trading at 24,586 points as of 7:05 a.m. IST, indicating that the Nifty 50 will open near Wednesday’s close of 24,574.2.
The one-month dollar-rupee non-deliverable forwards (NDF) indicate that the Indian currency is set to open largely unchanged from its last close.
“Markets can fall 1%-2% in a knee-jerk reaction, but most would expect a resolution to the trade issue,” said Dhiraj Relli, chief executive officer of HDFC Securities.
If tariffs persist for a year, the impact on India’s GDP growth will be around 30-40 basis points, he said.
Before the additional tariffs were announced on Wednesday, the Reserve Bank of India (RBI) retained its GDP growth forecast for the year at 6.5%, downplaying tariff-related uncertainties.
The doubling of tariffs to 50% - among the highest imposed on any U.S. trading partner - coupled with worsening bilateral ties could shake markets out of their complacency, Nilesh Shah, CEO of Kotak Mahindra Asset Management Company, said.
“Some correction” is inevitable if the tariffs hold, he added.
Foreign investors have offloaded Indian shares worth $900 million so far in August, following $2 billion in outflows in July as weak earnings growth and tariff-related uncertainties weighed.
“I would be very reluctant to buy into India or have a company that has supplies coming out of India. It would make me very cautious,” said Max Wasserman, founder and senior portfolio manager at U.S.-headquartered Miramar Capital.
Wasserman said he does not expect the tariffs to hold for long but the announcement “would definitely give us a pause if we were looking to invest in India because we want to see how the relationship shakes out.”
India’s benchmark equity indexes Nifty 50 and Sensex have gained 4% and 3%, respectively, so far in 2025, underperforming the 15.7% rise in MSCI Emerging Markets index.
Oil companies, exporters to be hit
The fresh U.S. tariffs threaten to disrupt India’s access to its largest export market, where shipments totalled nearly $87 billion in 2024, dealing a blow to sectors like textiles, footwear, gems and jewellery.
Oil companies like Reliance Industries could also come under pressure as the U.S. tries to push India to curb its Russian oil purchases.
“If we cave under pressure, we risk losing access to cheaper Russian crude, which could squeeze refining margins. That’s a risk for Reliance and oil marketing companies,” said Pramod Gubbi, co-founder at Marcellus Investment Managers.
Textiles could take a direct hit, although jewellery exports may be in a better position to pass on higher costs to U.S. consumers as India remains a dominant player in diamond cutting and polishing, Gubbi said.
IT services and pharmaceutical firms are less impacted for now, he added.
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