Indian Equities Fall Amid US Tariffs, Export Sectors Hit Hard

Indian equities fell as US tariffs raised duties to 50% on several goods, hitting export sectors like textiles, gems and jewelry, and marine products. Banks also dragged the Sensex, with HDFC Bank down 1.5% and ICICI Bank shedding 1.3%. Investors fear prolonged pressure on export-oriented sectors and US trade action aimed at penalising India for continued purchases of Russian oil. New Delhi is banking on GST reform proposals and selective duty relaxations to cushion domestic demand and offset external headwinds.

Indian equities experienced a sharp decline on Thursday, August 27, 2025, as the U.S. implemented a 50% tariff on several Indian goods, primarily targeting export sectors such as textiles, gems and jewelry, and marine products. The move, effective from Wednesday, has significantly impacted the market, with export-oriented companies bearing the brunt of the increased duties [1].

Shares of leading shrimp exporters, such as Avanti Feeds and Apex Frozen Foods, plunged by up to 12%, while textile exporters like Gokaldas Exports and Pearl Global also faced substantial losses. The tariff has eroded India's competitiveness, particularly in key sectors where competitors face lower tariffs [1].

The tariff shock, which included a 25% levy, raised import duties on Indian goods to as high as 50%, far higher than those imposed on Asian peers like Bangladesh and Vietnam. This has undercut India's competitiveness in key categories such as apparel and seafood, where the U.S. was India's top buyer in 2024-25, importing $2.7 billion worth of goods [1].

Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that while the tariffs may weigh on equities in the short run, they are unlikely to spark panic. He suggested that investors might rotate into domestic consumption themes and safer large-cap stocks [1].

The tariffs could shave up to 40 basis points off India’s FY26 growth, according to Sakshi Gupta, Principal Economist at HDFC Bank. Gupta warned of spillovers into jobs, investment, and sentiment, particularly in labor-intensive sectors such as leather, footwear, and gems & jewelry [1].

In addition to the tariff impact, banks also dragged the Sensex. HDFC Bank, one of India's largest private lenders, shed 1.5%, while ICICI Bank lost 1.3%. The Reserve Bank of India’s 100 basis points cut in the policy rate in the first quarter had led to a fall in net interest margins (NIMs) for several banks, but S&P Global expects NIMs to recover in the second half of FY26 [2].

The combined impact of these factors has led to a challenging environment for Indian equities. Investors are closely monitoring the situation, with hopes that New Delhi's proposed GST reforms and selective duty relaxations may help cushion domestic demand and offset external headwinds.

References:
[1] https://economictimes.indiatimes.com/markets/stocks/news/export-oriented-shrimp-textiles-stocks-slide-up-to-12-after-trumps-50-tariff-takes-effect/articleshow/123558049.cms
[2] https://www.business-standard.com/finance/news/indian-bank-nims-to-improve-in-h2-fy26-says-sp-global-125082800730_1.html