On April 4, 2025, global financial markets experienced significant turmoil following U.S. President Donald Trump’s announcement of reciprocal tariffs on imports from various countries, including India. These tariffs have had a profound impact on stock markets worldwide, including those in Mumbai.
Global Market Reaction
President Trump’s declaration of a “Liberation Day,” introducing steep global import tariffs, sent shockwaves through international markets. The tariffs, ranging from 10% to 50%, prompted immediate sell-offs in equity markets, with major indices like the S&P 500 and Nasdaq experiencing their most substantial one-day declines since 2020.
Impact on the Mumbai Stock Market
The Bombay Stock Exchange (BSE) Sensex and the National Stock Exchange (NSE) Nifty 50 mirrored this global downturn. The Sensex plummeted by 930.67 points (1.22%), closing at 75,364.69, while the Nifty 50 declined by 345.65 points (1.49%), ending at 22,904. This sharp decline erased approximately ₹9.5 lakh crore in investor wealth.
Sectoral Impact
The sell-off was widespread across various sectors:
- Pharmaceuticals: Initially, there was relief as pharmaceutical products were exempted from the new tariffs. However, this reprieve was short-lived, and the sector faced volatility due to ongoing tariff uncertainties.
- Information Technology (IT): IT stocks bore the brunt of investor concerns, with the Nifty IT index falling by 2.5% to 35,371.55, as the sector was not insulated from the broader market sell-off.
- Metals and Energy: Stocks in the metals and energy sectors also witnessed significant declines, contributing to the overall market downturn.
Resilient Performers
Despite the widespread downturn, certain stocks showed resilience:
- HDFC Bank: The bank’s shares gained 2% on the back of strong quarterly updates, providing some support to the financial sector amidst the broader market challenges.
Macroeconomic Implications
The introduction of these tariffs is expected to have broader economic implications for India:
- GDP Growth: India’s GDP growth is projected to decelerate by 20-40 basis points in the financial year 2025-26, potentially reducing growth from the Reserve Bank of India’s forecast of 6.7% to closer to 6.1%.
- Monetary Policy: In response to the economic slowdown, the Reserve Bank of India may consider additional interest rate cuts, with expectations of reducing the policy repo rate to 6.00% and potentially further to 5.5% by the end of the year.
Global Economic Concerns
The International Monetary Fund (IMF) has expressed concerns about the potential global economic risks associated with these tariffs, highlighting the possibility of a toxic mix of higher inflation and weakening economic growth.
Conclusion
The introduction of reciprocal tariffs by the U.S. has created a volatile environment for global markets, with the Mumbai stock market experiencing significant fluctuations. While certain sectors and stocks have shown resilience, the overall economic outlook remains uncertain. Investors are advised to stay informed and exercise caution as the situation evolves.
