India’s Stock Market Suffers Worst Day in 3 Months as U.S. Tariff Shock Sparks Panic

Tariff Shock Sends Markets Tumbling

Indian equity markets were thrown into chaos Tuesday, suffering their worst single-day drop in three months after Washington confirmed steep new tariffs on Indian goods. The U.S. announced an extra 25% levy, effectively doubling duties to 50%, in what is widely seen as retaliation for India’s continued imports of Russian oil.

The news triggered a wave of panic selling across Dalal Street, erasing August’s gains and raising questions about India’s ability to shield its economy from escalating trade pressures.

Benchmarks Hit Hard

The Nifty 50 plunged more than 1% to close at 24,712, while the BSE Sensex dropped 1.04% to 80,786, marking the sharpest fall since May.

Losses were spread across nearly every sector:

• 15 of 16 sectoral indices closed in the red
• Mid- and small-cap indices sank almost 2%
• Export-driven industries such as textiles, auto parts, and furniture faced the steepest declines

Rupee Weakens to Multi-Month Lows

The Indian rupee slid to 87.80 per U.S. dollar, extending its losing streak to five sessions. Traders said the currency is now within striking distance of record lows, and many expect the Reserve Bank of India (RBI) to step in if volatility continues.

Foreign Investors Head for the Exit

The tariff shock also triggered the largest foreign portfolio investor (FPI) outflow in six months, as global funds cut exposure to Indian equities. Concerns over weaker export earnings and rising current account deficits drove investors toward safer assets.

“Markets are resilient, but a 50% tariff wall is a seismic shock,” one strategist remarked. “It undermines corporate earnings and rattles global confidence in India’s export competitiveness.”

Why It Matters

Tuesday’s sell-off highlights the vulnerability of emerging markets to sudden shifts in trade policy. For India, the risks are immediate and profound:

• Export Competitiveness: Higher tariffs could wipe out cost advantages in U.S. markets.
• Currency Stability: A weakening rupee may push up import costs and inflation.
• Investor Confidence: Heavy foreign outflows could weigh on valuations in the near term.

Until clarity emerges from trade negotiations, Indian equities are expected to remain volatile, with sentiment tied closely to U.S. policy moves.