The Indian stock market is currently facing a complex interplay of factors, including global cues from the U.S. Federal Reserve (US Fed) and the unexpected imposition of tariffs by the United States. These events have led to overnight changes impacting investor sentiment and market dynamics.

GIFT Nifty Indicates a Muted Start

The GIFT Nifty, an indicator of how the Indian stock market might perform, is trading around 24,821, a discount of nearly 17 points from the Nifty futures’ previous close, suggesting a sluggish start for Indian indices. Previously known as SGX Nifty, GIFT Nifty is a derivative contract linked to India's Nifty 50 index, and it is now traded on the NSE International Exchange (NSE IX) in Gandhinagar, India. By following GIFT Nifty live, traders can get an early idea of how the Indian stock market may open and plan their trades accordingly. If the Gift Nifty index is rising, a positive start can be expected, but if it's falling, it signals caution for the day.

Trump's Tariffs Jolt the Market

In a move that has jolted investors and policymakers alike, U.S. President Donald Trump has announced a sweeping 25% tariff on Indian imports. The new tariffs, which will come into force this Friday, have the potential to rattle Indian equity markets. Trump accused India of maintaining some of the "most strenuous and obnoxious non-monetary trade barriers" and of running a "massive" trade surplus with the U.S. The decision has sent the rupee tumbling, posting its steepest one-day drop since May and hitting a five-month low on Wednesday. The Gift Nifty plunged nearly 170 points after the announcement.

Nilesh Shah, MD at Kotak Mahindra AMC, called the tariff move a clear negative for the markets. Experts say the market will have to live with volatility and the hope that this pressure leads to a deal. A federal appeals court temporarily restored the most broad in President Trump's trade policies.

The tariff announcement triggered concerns over its potential impact on India's exports and overall trade dynamics with the US. Gift Nifty futures declined sharply on Wednesday, falling 162 points or 0.65 per cent to 24,691.5, after U.S. President Donald Trump announced a 25 per cent tariff on Indian goods, along with an additional penalty.

US Fed Policy in Focus

The US Federal Reserve is expected to pause rate hikes and will likely avoid rushing into cuts. The earliest possible timeline for rate cuts could be September. The upcoming July policy meeting may turn out to be a non-event for the markets, as a pause has already been largely priced in. However, a dovish Fed may weaken the US dollar, which may trigger some foreign capital inflow to emerging markets like India. Most Fed officials think that the real impact of Trump's tariffs will be seen in months to come, and an early rate cut will damage the Fed's efforts to bring inflation down.

The Indian stock market is significantly influenced by the decisions of the US Federal Reserve, especially its “interest rate policies”. Whenever the US Fed announces changes, even a slight increase or decrease in interest rates can cause notable fluctuations in Indian stocks. A hike in the interest rates in the US impacts both the Indian markets and the economy negatively. The market tends to come down, foreign investors pull out. While a rate cut in the US Fed interest rates is a positive cue for the Indian markets as it would drive fresh foreign investors to the markets.

Expert Opinions and Market Outlook

Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd. said that they expect the markets to witness selective buying, driven by quarterly results; while broader sentiment would hinge on macroeconomic data and progress in the India-US trade deal.

Analysts had signaled that a rate of 20% or higher would come as a disappointment for India, which had been seeking a better deal than the 19% that Trump offered Indonesia and the Philippines.