Fears of American Fees Cause Significant Decline in the Indian Market

The possibility of U.S. tariff expansion triggered a significant wave of sell-offs in the Indian stock market, leaving investors on high alert. The country’s major financial centers faced a particularly challenging day, with cascading losses affecting virtually all sectors, from apparel to energy.

When Uncertainty Takes Over: The Numbers That Tell the Story

Indian benchmark indices reflected the market tension. The Sensex declined by 0.93%, while the Nifty 50 retreated by 1.04%. Over the past seven days, these two main metrics accumulated declines of 1.8% and 1.7%, respectively—numbers indicating persistent concern among traders.

The magnitude of the movement did not go unnoticed: it was the worst session for Indian indices in four months. The historical parallel is relevant—the last time the market experienced such volatility was on August 26, 2021, underscoring the seriousness of the current scenario.

The Affected: Sectors in Focus

Constant capital outflows dominated asset behavior. Sixteen major sectors closed lower, with particular emphasis on those with greater exposure to the American market.

Seafood exporters Apex Frozen and Avanti Feeds experienced particularly severe results, with declines of 7.8% and 8.6%, respectively. Apparel manufacturers and exporters Gokaldas Exports and Pearl Global Industries also suffered significant impacts, with drops of 8.5% and 7.9%. Both heavily depend on the U.S. market, which explains the intensity of the losses—more than half of their revenues come from this source.

In the metals sector, stocks retreated by 3.4%, marking the worst daily session in nine months. The (NIFOILGAS) energy index also performed poorly, with a 2.8% decline. Reliance Industries lost 2.2%, while analysts evaluated the implications of the Venezuelan crude oil import plan.

Beyond Stocks: Currency and International Flows

The Indian rupee also faced pressure during Thursday’s trading session. Foreign investors, historically significant for the local market, adopted a defensive stance—they liquidated positions worth US$900 million since the start of the year, contrasting sharply with the record US$19 billion in sales registered in 2022.

Anita Gandhi, head of institutional affairs at Arihant Capital Markets, clearly diagnosed the scenario: markets are uncomfortable with the lack of clarity regarding tariff guidelines that the U.S. government will implement on Indian products.

The Concrete Threat: Tariffs of up to 500%

Under the Trump administration, the possibility of significantly higher tariffs is more than speculative. The United States signals the imposition of tariffs that could reach 500% if India proceeds with its crude oil imports from Russia.

The complex geopolitical situation further complicates the scenario. India is the second-largest buyer of Russian crude oil, and continuing these transactions would put the country in direct conflict with U.S. trade policies. The U.S. had already imposed a 50% tariff on Indian exports, and the potential tenfold increase of this rate hovers like a Damocles sword over negotiations.

Indian negotiation attempts included arguments about reducing trade relations with Moscow, with particular emphasis on the declines recorded in Russian crude oil imports in December. However, energy analyses reveal nuances: the reduction was not due to state decisions but to specific factors, including Reliance Industries’ purchases following American sanctions on Lukoil and Rosneft.

The complexity of global trade dynamics and regulatory uncertainty continue to fuel the volatility that marks Indian markets.