Relations with the United States and India have taken a turn for the worse as President Trump imposes a new blanket policy for a 25% tariff on Indian imports effective immediately on August 1st. While negotiations for a trade deal are underway, this new policy comes as a shock. Additionally, it greatly impacts the Indian stock market, especially for sectors that depend greatly on US Exports.
Widespread Damage for Different Sectors
Major analysts and investors expect selling pressure on the entire economy to be aggressive in major sectors such as IT, pharmaceuticals, automotive, textiles and engineering. These sectors have a strong hold on the US market, and the new imposition will definitely have a negative impact on the market and investor sentiment.
A registered market expert with SEBI, Avinash Gorakshkar, highlighted the impact on these sectors: “A 25% tariff will definitely hit industries with significant US exposure. IT, textiles, pharma, autos, and even export-oriented players in engineering and jewellery may come under pressure.”
Crosshairs on IT Giants
The brunt will undoubtedly impact the Indian IT industry, given their significant business with US clients. TCS, Infosys, Wipro, and HCL Tech, as industry leaders, may experience some short-term selling pressure. However, a weakening rupee might protect part of this pressure on their balance sheets.
As noted by Gorakshkar, the “large cap IT companies have huge exposure to North American economies,” and any unresolved trade tensions will “contribute to volatility.
Jewellery Stocks May Lose Their Shine
Gems and jewellery exporters are under the same pressure. Stocks of Titan, PC Jeweller, and Kalyan Jewellers can drop since the US is a major market for Indian jewellery exports.
Pharmaceutical and Automotive Stocks Under The Scanner
As Mahesh M. Ojha, AVP – Research at Hensex Securities, highlighted, there is also concern for Indian pharma and auto industries. “The US is an important market for Indian drug producers. Sun Pharma, Dr. Reddy's, Lupin, Cipla, and Aurobindo Pharma may see increased selling.”
The US market poses a risk for entire automobile industry too. Companies with a focus on exports like Tata Motors, Samvardhana Motherson, Bharat Forge, Bosch India, Sundram Fasteners, and Endurance Technologies now attract attention due to concern of tariffs.
Textiles, Engineering, and Agro Exports: Untapped Potential
Other industries with a focus on exports may also get affected due to the tariffs. In textiles, companies such as KPR Mill, Arvind, Page Industries, Vardhman Textiles, and Gokaldas Exports could get squeezed. Engineering companies such as BHEL, Thermax, ABB India, Havells, Polycab could also get the impact.
Within agro-export, KRBL, Avanti Feeds, and LT Foods are market analysts as they heavily rely on exports to the US.
Trump's Statement: A ‘Friend’ that Ruins Trade Relations
A US President with an effort to “protect” US industries Trump: India clearly has some of the highest tariffs on American goods, and Indian officials are to blame for what has been described as ‘non-productive’ trade policies.”
“We have very few interactions with India as they are friends of ours due to oversized tariffs.,” Trump posted on Truth Social. Notably, the tariff decision does not include sanctions based on India’s energy and defense relations with Russia.
Investor Advisory
Companies listed on the Stock Exchange are likely to see overall trade downturn, however, the knee-jerk reaction of such is dangerous. Seeking professional guidance of licensed and experienced financial advisers is essential. Implementing changes during such geopolitcal events risks bankrolling the investor’s portfolio.
