Beyond the tariff shock: How investors can navigate India’s new trade test
Srinagar, Aug 8: The Indian stock market has taken a sharp hit over the past three trading sessions, following a dramatic policy move by US President Donald Trump to impose 50% tariffs on Indian exports. The tariffs, which are reportedly in response to India’s continued oil trade with Russia, have sparked investor unease, sectoral declines, and a fresh wave of foreign capital outflows.
Both the BSE Sensex and Nifty 50 suffered significant declines, with the Sensex shedding more than 500 points and the Nifty slipping below the psychological 24,500 mark. Export-reliant sectors, especially gems and jewellery, pharmaceuticals, and auto components, bore the brunt of the sell-off. Foreign Institutional Investors (FIIs) withdrew nearly Rs 15,950 crore from Indian equities in August, reflecting heightened risk aversion. However, strong inflows from Domestic Institutional Investors (DIIs) and mutual funds helped soften the blow.
Financial planner and market expert Taresh Bhatia called the move “a classic case of perception overwhelming fundamentals.” He said, “In my decades as a Certified Financial Planner, I’ve learned that markets are rarely moved by facts alone. It’s perception, policy, and positioning that drive big shifts. And right now, one major policy decision is shaking investor sentiment to the core.”
Bhatia explained that while India’s exports to the U.S. constitute a small portion of GDP, the symbolic impact of the tariff hike is outsized. “It’s not just about numbers. What unnerves markets is the message — that global trade politics can change overnight, and when they do, they create ripples far beyond the sectors directly involved.”
He emphasised that the present moment should be viewed as a strategic inflection point, not just a temporary setback.
“This is not the time to panic. It’s time to recalibrate. Investors must understand that India’s long-term story is still intact. We’re a consumption-led economy, not an export-dependent one like Taiwan or Vietnam. Our domestic resilience is strong. Our banking system is well-capitalised. And we are in the middle of a digital and infrastructure transformation that goes well beyond a single trade disruption.”
Commenting on investor behaviour, Bhatia warned against reactionary decisions driven by headline anxiety. “Those who panic-sell now are locking in fear, not risk. The bigger danger isn’t market correction — it’s misjudging the underlying strength of the economy. A tariff shock is visible. Structural growth is not. But it’s there, quietly compounding.”
Reflecting on the broader context, Bhatia noted, “Trump’s move is a reminder that global investing requires global thinking. Indian investors must now seriously consider international diversification — not just as a return strategy, but as a hedge against geopolitical shocks. It’s about being globally aware, but locally rooted.”
He also highlighted the importance of maintaining liquidity and patience. “We’re in a market where valuations are stretched, sentiment is fragile, and policy noise is high. This is when discipline matters most. Those who keep their powder dry — who stay liquid, focused, and selective — will be the ones best positioned to ride the recovery when it comes.”
Calling this India’s own “Agneepath moment,” Bhatia echoed NITI Aayog’s sentiment that this is an opportunity for structural reform. “Sometimes, the toughest headlines create the strongest economies. If this leads to reforms in export competitiveness, logistics, or trade policy, we’ll look back at these tariffs not as a blow, but as a catalyst.”
