Stock Market Crash Affects Indian Equities
In a significant development, the US tariffs announced in 2025 have disrupted the global trade system, causing panic in Asian markets, including India. The tariffs, which targeted major trading partners such as China, Canada, and Mexico, have led to a chain of events that have affected India's Sensex and Nifty-50 indices.
The US tariffs, reaching up to 30% on Chinese goods, have significantly disrupted global supply chains and trade flows, triggering retaliatory tariffs and raising costs internationally. This has resulted in a depreciation of the US dollar and increased inflation globally, contributing to economic uncertainty and slowing growth in multiple countries, including the US and its trade partners.
In India, the impact of these tariffs is estimated to result in an $8 billion increase in export costs, affecting approximately $85 billion worth of Indian exports. This could lead to higher prices and reduced competitiveness of Indian goods in the US market. While tariffs may create some shifts in global supply chains, potentially favoring India over China, the current environment of uncertainty is causing investors to hold back on large investments, especially in sectors requiring heavy capital, thus delaying benefits for India.
India is actively seeking full exemption from the US tariffs, with the tariff suspension set to end around July 9, 2025. If exemptions are not granted, tariffs may be imposed, potentially impacting export-oriented sectors in India.
The impact of these tariffs on Indian stock markets has been noticeable. On a particular day, the Sensex touched a low of 71,425, losing 3,939.68 points intraday, and the Nifty-50 dropped by a similar margin. JSW Steel's share price decreased by 7.53%, Tata Steel's by 7.26%, and Hindalco's by 5.92%. The broader market suffered the most, with the BSE Mid-cap index falling 3.46% and the BSE Small-cap index falling 4.13%. The BSE Capital Goods index fell 4.34%, and the BSE Metal index recorded a 6.22% fall for the second consecutive session. The Auto index also fell 3.77%.
However, the Sensex staged a recovery by the end of the day, ending at 73,137.90. Despite global trade tensions, Indian stock markets, including the Sensex and Nifty-50, have shown resilience due to strong domestic fundamentals such as expected fiscal stimulus, interest rate cuts, tax rebates, and ongoing infrastructure growth that bolster medium-term growth prospects.
Despite the volatility, domestic institutions stepped in to buy stocks worth `12,122.45 crore, offering some support to the market. The Bankex index fell 3.37%, except for the FMCG sector (-1.29%) and the Power sector (-2.09%).
Meanwhile, Asian markets such as Japan and Hong Kong have also been affected. Japanese stock market circuit breakers were activated due to the fall in market value, and Hong Kong stock exchange witnessed its worst sell-off since 1997. Chinese markets experienced panic selling on their first day of reopening following the US tariff announcement.
In conclusion, the US tariff increases contribute to heightened global trade tensions and raise costs for exports worldwide, including India, causing trade disruptions and economic uncertainty. While Indian equity markets have shown resilience due to strong domestic fundamentals, they remain sensitive to the evolving trade war environment and its implications on exports and foreign investment.
- The increased US tariffs, along with their impact on global supply chains and trade flows, have extended to the Indian finance sector, potentially increasing export costs for Indian businesses by $8 billion and influencing market trends in the stock exchange.
- The interconnectivity of business, politics, and general-news is evident in the ongoing trade disputes, as the announcement of US tariffs in 2025 has not only disrupted the global trade system but also affected the competitiveness of Indian goods in the US market, contributing to economic uncertainty and volatility in local and Asian stock exchanges.