Benchmark stock market indices were under pressure on July 31, reeling from a double whammy overnight: a sweeping 25% US tariff on Indian exports and fresh diplomatic strain over New Delhi’s ties with Moscow.
Both the main indices on Dalal Street fell sharply in early trade, and despite recovering by noon, the mood remains tense after Washington’s move threatened to upend trade flows across key sectors.
Announced late July 30 by President Donald Trump, the tariff package—set to take effect August 1—targets a wide swathe of Indian goods, from auto parts and electronics to textiles and solar modules.
The sanctions coincide with veiled US warnings linked to India’s oil purchases from Iran and arms deals with Russia, signalling that economic friction may soon bleed into geopolitics.
Export-heavy stocks bore the immediate brunt, with analysts warning of sustained volatility and a shift in portfolio strategies.
“Export-oriented stocks can underperform in the near term,” said Vaqarjaved Khan, CFA and Senior Fundamental Analyst at Angel One. “Investor sentiment is expected to remain cautious.”
Here’s how the blow is playing out across key sectors:
AUTO AND AUTO COMPONENTS
No sector wears the bullseye quite like autos. US dealerships represent a major chunk of revenue for Indian auto component manufacturers, many of whom run just-in-time exports to Detroit and beyond. The impact on margins and volumes is expected to be swift. Stocks across the value chain—from engine part makers to tier-two suppliers—saw early selling pressure.
SMARTPHONES, ELECTRONICS, AND SOLAR MODULES
India’s electronics and solar manufacturing boom—largely driven by US demand—is now staring down evaporating price power. “Companies with predominantly US-focused exports are expected to underperform,” Khan warned. Those without a diversified base or alternate geographies will be forced to recalibrate strategies quickly, or risk prolonged underperformance.
TEXTILES, GEMS, AND JEWELLERY
From Surat’s polishing hubs to Tiruppur’s garment lines, the fallout is severe. “US orders are expected to contract or face pricing pressures,” Khan said, adding that competition from Bangladesh and Vietnam may eat further into India’s traditional dominance. For family-run export houses, the sudden price distortion is likely to ripple through working capital and cash flows.
STEEL AND METALS
While not directly targeted, the sector wasn’t spared. Sentiment-driven dips hit most metal counters, with niche exposures like graphite electrodes under particular stress. Analysts say long-term impact may be muted, but near-term volatility will persist—especially if tit-for-tat responses escalate globally.
PHARMA
Pharmaceutical stocks stood out for their relative calm. “The sector remains largely exempt from the new tariffs,” said Mayank Jain, Market Analyst at Share.Market. But the reprieve may not last. With US regulators investigating drug import pipelines, policy risk lingers just beneath the surface.
IT SERVICES
Indian IT majors don’t face direct tariff impact, but weak US macros and cautious corporate spending are already tightening deal pipelines. “IT majors with substantial US revenues may underperform,” Jain noted, though the sector is likely to fare better than manufacturing-linked peers.
WHAT NOW?
The tariff tremors could shift market focus sharply inward. “Investors are expected to shift toward domestic growth themes—consumption, infrastructure, and financials,” Khan said.
For foreign portfolio investors (FPIs), it may be a case of ‘wait and watch’ until clarity emerges from upcoming trade talks. If the duties stay in place into September or beyond, economists warn of a 20-basis-point downgrade to India’s FY26 GDP—a setback just as the economy looked poised for a broad-based recovery.
Meanwhile, bilateral trade talks—initially aimed at doubling US-India trade to $500 billion by 2030—are now facing their biggest political test in years.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)f
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