Picture abhi baki hai: Why Sensex, Nifty dodged Trump’s 25% tariff bullet

US President Donald Trump's bombshell announcement of a brutal 25% tariff on Indian goods imports, the highest among Asian nations, and coupled with mysterious "additional penalties" for Russia ties, sent shockwaves through sectors from textiles to pharmaceuticals. The Sensex and Nifty tumbled around 1% each in the morning but quickly recovered all the losses as tariffs are expected to be negotiated lower next month.

The tariff assault, effective August 1st, marks India as Trump's primary Asian target with rates that dwarf those slapped on Vietnam (20%), Indonesia, and the Philippines (19% each). Market experts point out to the fact that not only is the negotiation road still open, but FIIs have already priced in most of the tariff pain as they have already withdrawn around Rs 25,000 crore from the stock market in the last 8 days of non-stop selling.

“The announced higher reciprocal tariff rate of 25%, however, may be temporary, and might settle down lower. Unlike other countries, India is in the process of securing a detailed trade deal with the US. Most of the other countries have secured very rough-cut deals, with some agreements largely verbal. Indian government sources had previously suggested that an 'interim' deal was meant to be part of a more comprehensive trade deal that would take until end-2025 to agree upon,” Nomura’s Sonal Varma said.

While stating that India has undertaken a more sensible approach to prioritise detailed evaluation of any trade deal instead of agreeing on a hurried deal based on a tight deadline, Varma said these negotiations will take time and, very importantly, are still ongoing.

“The US trade delegation is set to visit India at the end of August as part of this process. Hence, the elevated tariffs announced by the US are unlikely to be permanent, in our view, although the best-case outcome would be tariffs in the 15-20% range,” the brokerage firm said.

Also Read | Trump tariff assault hits over 40 Indian stocks. Full list across key sectors for stock market investors

Geojit’s Dr. VK Vijayakumar also agreed, saying while the tariff is very bad news for Indian exports and thereby on the growth prospects of the Indian economy in the short run, it is the typical Trumpian strategy to get better deals from India in other areas and finally settle at a tariff rate around 20% or less.

"Nifty is unlikely to go below the support level of 24500. Investors can buy the dip focusing on domestic consumption themes, particularly segments like leading private sector banking names, telecom, capital goods, cement, hotels and select autos which have done well in Q1,” he said.

The tariff tsunami crashed hardest into exporters across auto components, select capital goods, chemicals, pharma, refiners, solar and textiles. Nuvama sounded a more ominous note about the real danger lurking beneath: "The higher tariffs on India (versus expectations) could potentially weigh on capital flows."

"FII flows have now become critical in shaping market outcomes amid heavy promoter selling and slowing DII flows,” it said, adding that rupee depreciation could help IT and it could potentially outperform given the now low relative valuations.

Emkay's economist lead Madhavi Arora delivered perhaps the most reassuring assessment: "The tariff will have little impact on India's 2HFY26E earnings recovery trajectory, as high-weightage sectors such as financials, consumption, and technology are unaffected."

Her verdict on the 25% rate: "We believe the 25%+ regime is the worst-case scenario and the final bilateral deal could be reached with a lower tariff ... .In any case, a meaningful correction is an opportunity to buy the market with consumer discretionary and industrials as the key sectors."

With Indian government sources previously suggesting an 'interim' deal as part of a comprehensive trade agreement lasting until end-2025, the current tariff rates appear more like opening shots in a prolonged negotiation rather than final settlements.