Sensex, Nifty Tumble as Trump's Tariff Threat Rattles Dalal Street

The Indian stock market stumbled on Tuesday, August 5, 2025, as the spectre of a trade war returned to haunt Dalal Street. A social media post from US President Donald Trump, threatening “substantially” higher tariffs on India, sent a wave of uncertainty through the market, leading to a significant sell-off that erased early gains.

The benchmark indices felt the pressure throughout the trading session. The BSE Sensex closed at 80,710.25, down by 308.47 points (0.38%). Similarly, the NSE Nifty 50 ended the day at 24,649.55, marking a drop of 73.20 points (0.30%). While the market managed a partial recovery from its intraday lows, the decline was broad-based.

The Catalyst: Trump’s Renewed Tariff Threat

The primary trigger for the market’s downturn was a post on Truth Social by Donald Trump. He criticised India for purchasing Russian crude oil and allegedly reselling it for a profit. “Because of this, I will be substantially raising the Tariff paid by India to the USA,” Trump wrote, reigniting fears of a trade conflict that had previously caused significant global market volatility.

This threat introduced a major element of uncertainty for investors, who are already navigating a mixed corporate earnings season and anticipating the Reserve Bank of India’s (RBI) upcoming monetary policy decision.

Sectoral Impact and Market Response

The market’s reaction was swift, with selling pressure visible across most sectors. The hardest-hit areas included Nifty Pharma, which fell by 0.93%, followed by Oil & Gas (down 0.85%), and both FMCG and IT, which were lower by 0.65%. Heavyweights like Reliance Industries, Infosys, and Adani Ports were among the top losers on the Sensex, contributing significantly to the index’s decline.

In a firm response, India’s Ministry of External Affairs called the criticism “unjustified and unreasonable.” The ministry clarified that India increased its oil imports from Russia only after traditional supplies were diverted to Europe following the Russia-Ukraine conflict, a move the US had previously encouraged to ensure global energy stability.

Expert Analysis: “A Big Threat”

Market analysts quickly weighed in on the potential fallout. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, described the situation as a “big threat.” “If he walks his talk, India-US relations will further strain, and the impact on India’s exports to the US can be worse than thought earlier,” he stated.

Vijayakumar added that the market, already trading at high valuations, has not factored in such a negative possibility, placing it in “uncharted territory.” This sentiment captured the cautious mood that prevailed among traders and investors.

What Should Investors Do Now?

For retail investors, sudden, politically-driven market swings can be unnerving. It serves as a stark reminder that global events can have an immediate impact on your portfolio. The key is to avoid panic-selling, which often locks in losses.

Instead, this is an opportune moment to review your investment strategy.

• Assess Diversification: Is your portfolio well-diversified across different sectors to mitigate risk?
• Focus on Fundamentals: Are your investments in fundamentally strong companies with solid long-term prospects?
• Stay Disciplined: A well-researched and disciplined investment approach is the best defence against short-term market volatility.

Key Factors to Watch

As the market digests this development, investors should monitor the following:

• US-India Trade Dialogue: Any follow-up statements from either government will be crucial. The market will be looking for signs of de-escalation.
• RBI Monetary Policy: The upcoming RBI policy meeting is now even more critical. The central bank’s commentary on global risks and its interest rate stance will heavily influence market direction.
• Nifty’s Technical Levels: According to Rupak De, Senior Technical Analyst at LKP Securities, the Nifty is trading within a range. “Only a decisive move beyond this range might determine the next course of action for the market,” he noted, highlighting key support levels around 24,500.
• Q1 Earnings Season: Corporate earnings reports will continue to be released. Strong results from key companies could provide much-needed support to the market.

This article is for informational purposes only and should not be considered investment advice. Please conduct your own research before making any investment decisions.