Indian Markets Set for Lower Open Amid Trump Tariffs

The Indian stock market faces significant pressure as the Sensex and Nifty 50 are expected to open lower, continuing a downward trend that has now stretched to five consecutive sessions. The primary catalyst for this negative sentiment stems from former US President Donald Trump’s announcement of substantial new tariffs on key imports. Effective October 1, the tariffs will impose a 100% levy on pharmaceutical drugs, 50% on kitchen cabinets and bathroom vanities, 30% on upholstered furniture, and 25% on heavy trucks. This move has injected fresh uncertainty into global trade dynamics, particularly affecting sectors with significant export exposure to the United States.

Compounding the trade-related anxieties, robust US economic data has dramatically altered expectations for monetary policy. Stronger-than-anticipated indicators have cast doubt on the Federal Reserve’s timeline for interest rate cuts, a key factor that had previously supported emerging market equities like those in India. The combination of protectionist trade policies and a potentially more hawkish Fed has created a perfect storm of negative sentiment, dragging down Asian markets and setting the stage for a weak opening in Mumbai.

On Thursday, the domestic market’s losing streak continued unabated. The Sensex slumped by 555.97 points, or 0.68%, to close at 81,159.68, while the Nifty 50 declined by 166.05 points, or 0.66%, settling perilously below the 24,900 mark at 24,890.85. This fifth straight session of losses reflects growing investor caution amid global volatility. The technical outlook was further dampened by the performance of Gift Nifty, a key early indicator. Trading near 24,902, approximately 66 points lower than the previous Nifty futures close, it provided a clear signal that selling pressure was likely to persist into Friday’s session.

The consistent decline highlights how interconnected global markets have become. Indian equities, despite strong domestic fundamentals, are not immune to shocks originating from Washington or Wall Street. The breach of key psychological levels, such as the Nifty 50 falling below 24,900, often triggers further technical selling, potentially exacerbating the downturn. Investors are now closely watching for domestic catalysts that could help stabilize the market and provide a floor to the current slide.

Overnight, Wall Street mirrored the global anxiety, closing firmly in the red. The Dow Jones Industrial Average fell 173.96 points (0.38%) to 45,947.32, the S&P 500 dropped 33.25 points (0.50%) to 6,604.72, and the Nasdaq Composite declined 113.16 points (0.50%) to 22,384.70. The sell-off was driven by a suite of unexpectedly strong economic reports that forced a recalibration of interest rate expectations. Fewer Americans filed for unemployment benefits, with initial claims dropping to 218,000, well below forecasts of 235,000.

Furthermore, US durable goods orders rebounded sharply, rising 2.9% in August after a decline in July. More critically, orders for core capital goods—a key proxy for business investment—unexpectedly increased by 0.6%, defying economist predictions of a 0.1% decline. The most significant revision came from GDP data, which showed the US economy grew at an annualized pace of 3.8% in the second quarter, up from the previous estimate of 3.3% and marking the strongest growth since the third quarter of 2023. This robust economic health reduces the urgency for the Federal Reserve to cut rates, strengthening the US dollar and creating headwinds for gold and other dollar-denominated assets.

The stronger dollar, buoyed by the positive US data, exerted pressure on commodities. Gold prices declined, with spot gold trading 0.2% lower at $3,741.71 per ounce. US gold futures were virtually flat at $3,772.20. For Indian markets, the immediate path is clouded by these external factors. The focus will remain on global cues, particularly any further developments regarding US trade policy and incoming data that might influence the Federal Reserve’s September meeting.

While domestic institutional support could provide some cushion, the overarching narrative is one of caution. Investors are likely to adopt a wait-and-watch approach, seeking clarity on the longevity of these global headwinds. The convergence of trade tensions, shifting central bank expectations, and technical breakdowns in key indices suggests that volatility will remain elevated in the near term, testing the resilience of the Indian equity market.