The Indian stock market is facing a fresh wave of uncertainty following US President Donald Trump's announcement of a 25% tariff on goods imported from India, effective August 1, 2025. This move, along with a potential penalty for India's energy and defense ties with Russia, has triggered concerns across various sectors.

Market Impact and Expert Views

The announcement led to an initial slump in the Indian equity markets, with the Sensex and Nifty indices opening lower. However, the markets showed some recovery in the afternoon, indicating a degree of resilience. Experts suggest that the market may remain range-bound, focusing on ongoing earnings.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, believes the tariffs are "very bad news" for Indian exports and the country's short-term growth prospects. He anticipates a short-term hit to Indian exports and GDP growth, which will likely be reflected in the stock market. However, he also suggests that the 25% tariff might be reduced after trade negotiations commence in mid-August.

Tomo Kinoshita, global market strategist at Invesco Asset Management, stated that the tariffs should have a moderately negative impact on India's stock market, especially for export sector stocks.

Sectors Under Pressure

Several sectors are expected to bear the brunt of the tariff hike. These include:

• Textiles: Companies like KPR Mill, Arvind, Page Industries, Vardhman Textiles, and Gokaldas Exports may experience selling pressure.
• Pharmaceuticals: Major players such as Sun Pharma, Dr. Reddy's, Lupin, Aurobindo Pharma, and Cipla, with significant exposure to the US market, are likely to face challenges.
• Automotive: Auto companies like Tata Motors, Samvardhana Motherson, Bharat Forge, and Bosch India are anticipated to be impacted.
• Gems and Jewellery: Titan, PC Jeweller, and Kalyan Jewellers may see selling pressure.
• Engineering: BHEL, Thermax, ABB India, Havells, and Polycab could also feel the heat.
• Agro Exports: KRBL, Avanti Feeds, and LT Foods may be affected.

Other export-oriented sectors, including electronics and leather goods, are also expected to face increased volatility. Nuvama has cautioned that India's export-driven sectors may face turbulence. They estimate that India's goods exports to the US, valued at approximately $87 billion, could be significantly impacted.

Stocks to Watch

Based on the potential impact of the tariffs, investors may want to monitor the following stocks across key sectors:

• IT: TCS, Infosys, HCL Technologies
• Pharma: Sun Pharma, Dr. Reddy's, Lupin, Aurobindo Pharma, Cipla
• Auto: Tata Motors, Samvardhana Motherson, Bharat Forge, Bosch India
• Textiles: KPR Mill, Arvind, Page Industries, Vardhman Textiles, Gokaldas Exports
• Gems and Jewellery: Titan, PC Jeweller, Kalyan Jewellers
• Engineering: BHEL, Thermax, ABB India, Havells, Polycab
• Agro Exports: KRBL, Avanti Feeds, LT Foods

Investor Strategy

Analysts suggest a cautious approach, advising investors to maintain prudent positioning and consider protected trading strategies given the expected market fluctuations. Despite the potential for short-term pain, some experts believe that the market is unlikely to decline significantly and suggest buying the dip, focusing on domestic consumption themes such as leading private sector banks, telecom, capital goods, cement, hotels, and select auto stocks.

It is also important to understand that the 25 per cent tariff will come down after the negotiations which start in mid-August.