July 27, 2025

The Indian stock market experienced a significant downturn last week, reflecting ongoing concerns regarding the India-US trade deal and its implications for local industries. The Nifty 50 index registered a notable drop, losing nearly 400 points from its weekly high and closing below the crucial 50-day exponential moving average (DEMA) support level at 24,900. Market analysts have noted that this sell-off is largely driven by uncertainty surrounding the India-US trade agreement. Experts warn that the euphoria surrounding the potential deal may not be sustainable, especially considering the reality of likely tariffs that could be imposed following its completion. Avinash Gorakshkar, a SEBI-registered market analyst, cautions investors regarding the potential impact on India's IT, pharma, and textile sectors, urging them to remain vigilant about the deal's outcomes. He highlights the importance of ensuring that the agreement adequately addresses the interests of these critical industries. Failure to do so could lead to an even sharper decline on Dalal Street. Despite the optimistic market sentiment catalyzed by the trade discussions, Gorakshkar emphasizes the necessity of a practical outlook. He points out that the average US tariff on goods was approximately 2.5% as of December 31 last year. Should that tariff rise to the anticipated range of 15-20% due to ongoing negotiations, it would represent a significant increase and is expected to dominate market trends even with an India-US deal in place. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, adds that investors should focus not just on the absolute tariff rates but also on their relative standing compared to other trading partners. He emphasizes the higher tariffs currently being imposed on countries like Indonesia and Vietnam, predicting that firms in India may face similarly elevated rates. Consequently, if India is able to negotiate a tariff anywhere between 15% and 20%, it could be seen as a reasonable outcome in the current environment. However, Vijayakumar warns that the Trump administration’s protectionist policies will likely result in challenges for developing countries hoping to export to the US without facing substantial tariffs. In a related context, US Treasury Secretary Scott Bessent recently provided insight into the potential revenue generated from tariffs, projecting that they could reach $300 billion this year alone—a figure that would account for roughly 1% of the US GDP. Further extrapolation suggests that with anticipated goods imports of $3.3 trillion next fiscal year, tariff revenues could amount to nearly $500 billion, surpassing 1.5% of GDP. Nevertheless, there are voices advocating for optimism regarding the impending trade deal between India and the US. Arvind Panagariya, Chairman of the 16th Finance Commission, indicated that the agreement holds promise for bolstering India's position as an attractive destination for investors. He confidently stated that successful negotiations will not only enhance India's relationship with the US but will also facilitate trade discussions with the European Union, thereby opening up substantial market opportunities. Panagariya remarked, "A lot of the current things that are underway are very exciting. The US-India trade agreement, along with the expected agreement with the European Union, will provide India with substantial market access. For any future investor, that makes India highly appealing since it indicates a reduction in trade barriers.\" He believes that these developments will act as a game changer for the Indian economy. In light of the volatility currently affecting the stock market, potential investors are advised to remain cautious. The perspectives shared by analysts emphasize the necessity for careful consideration of the broader implications of trade negotiations, current tariffs, and overall market stability before making investment decisions. As indicated by the evolving situation in the stock market, continued diligence will be essential for navigating the uncertainties presented by the India-US trade discussions. *Disclaimer: The recommendations made are those of individual analysts or firms and do not reflect the views of Mint. Investors are urged to seek advice from certified experts before making investment choices.*

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Tags: Stock market crash, India-us trade deal, Trump tariffs, Retail investors, Market analysis,