Trump Tariff Shock: Indian Markets Weather Sixth Straight Week of Declines

The Indian stock market faced a challenging last-week marked by overall declines for the sixth consecutive week amid continuing investor concerns due to US tariff hikes and geopolitical tensions.

Donald Trump’s decision this week to impose a 50% tariff on Indian exports caused significant turmoil in Indian financial markets. Export-oriented sectors—especially textiles, gems and jewellery, chemicals, auto ancillaries, and seafood—were hit hardest, as the new tariffs leave Indian goods at a significant disadvantage versus global competitors like Bangladesh and Ecuador. Foreign investors further soured on Indian equities, accelerating capital outflows.

The Reserve Bank of India’s decision to keep interest rates unchanged, along with its neutral policy stance, failed to boost investor sentiment amid persistent foreign portfolio outflows. The overall market showed weakness, with major indices like Nifty and Sensex ending the week lower. The BSE Sensex declined 0.9% and the Nifty slipped 0.8%. The BSE Mid-Cap index fell 1.3%. The BSE Small-Cap index dropped 1.9%.

Institutional flows highlighted a substantial divergence between Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). FIIs maintained their selling streak, withdrawing approximately Rs 10,600 crore. Conversely, DIIs were net buyers, injecting around Rs 33,600 crore and providing strong support.

During the week ending August 8, 2025, PSU Bank index increased 1.6% and Metal gained 0.5%. On the downside, major laggards were Pharma index down by 2.8%, Realty index fell 2.5%. FMCG index declined by 2.3% and Defence index was down 1%.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest. To get any error corrected, please write to content@hdfcsec.com.

Source: HDFC Securities Prime Research