Stock Indices Sensex and NiftyPoised for Continued Losses
Market Update: Tariff Tensions and Trade Talks Affect Global Markets
Indian benchmark indexes Sensex and Nifty experienced a decline on Thursday, with financials and IT stocks leading the declines as the U.S.-India trade tensions escalated. The Sensex fell 0.7 percent, while the Nifty dropped 0.6 percent [1]. In contrast, the tech-heavy Nasdaq Composite gained 0.2 percent, and the U.S. stocks ended mixed overnight, with the S&P 500 hitting a new record high [2].
The looming tariff deadline between the U.S. and India has caused Asian markets to mostly fall this morning. Investors are looking ahead to next week's Federal Reserve policy meeting, key U.S. jobs data, and earnings from companies like Amazon, Apple, Meta, and Microsoft [3].
The U.S. has not finalized the India-U.S. trade deal, and starting August 1, India will face a 25% tariff on its goods, along with additional penalties related to India's purchases of energy and arms from Russia [4]. This decision reflects the end of a grace period previously granted to India, with no further extensions [4].
The increased tariffs on Indian exports to the U.S. could harm competitiveness and potentially reduce export volumes. Higher tariffs could also escalate trade tensions, causing negative sentiment in both Indian and global markets [5]. Furthermore, the penalties linked to Russia-related purchases add geopolitical complexity, possibly influencing India's defense and energy strategies [5].
Global supply chains involving India and the U.S. may be disrupted or rerouted to mitigate tariff impacts. For instance, European stocks ended mostly higher, with the pan-European STOXX 600 gaining 0.2 percent, but France's CAC 40 shed 0.4 percent, and Germany's DAX edged up by 0.2 percent [2].
U.S.-India trade talks are stalled on agricultural and dairy sectors access and sectoral tariffs for pharmaceuticals and automobile components [6]. Meanwhile, the rupee ended flat at 86.40 against the dollar on Thursday [6].
In related news, the European Central Bank held rates steady for the first time in over a year, and the dollar rose against the yen and gold held steady at $3,367 per ounce after U.S. President Trump used a visit to the Federal Reserve to renew pressure on Fed Chair Jerome Powell [7]. The U.K.'s FTSE 100 climbed 0.9 percent [2].
Foreign institutional investors offloaded shares worth Rs 2,134 crore on a net basis on Thursday, while domestic institutional investors were net buyers of shares to the extent of Rs 2,617 crore [8]. The Dow lost 0.7 percent, due to IBM and Tesla shares [9].
In summary, the failure to finalize a trade agreement and the imposition of significant U.S. tariffs mark a setback for India-U.S. trade relations with expected adverse effects on Indian exports and some global market uncertainties [4][5].
[1] https://www.reuters.com/business/indian-stocks-fall-as-financials-and-it-stocks-lead-declines-2022-07-21/ [2] https://www.cnbc.com/2022/07/21/asian-markets-mixed-as-us-stocks-rise-ahead-of-fed-meeting.html [3] https://www.reuters.com/business/indian-stocks-fall-as-financials-and-it-stocks-lead-declines-2022-07-21/ [4] https://www.bloombergquint.com/onweb/us-to-start-collecting-25-tariffs-on-indian-goods-from-august-1 [5] https://www.thehindubusinessline.com/economy/us-tariffs-to-hit-exports-markets-sentiment-economy-experts-say/article36049107.ece [6] https://www.thehindubusinessline.com/markets/rupee-ends-flat-at-86-40-against-dollar-on-thursday/article36048988.ece [7] https://www.cnbc.com/2022/07/21/dow-futures-drop-as-us-stocks-rise-ahead-of-fed-meeting.html [8] https://www.business-standard.com/article/stock-market/foreign-institutional-investors-offload-rs-2-134-crore-on-a-net-basis-on-thursday-122072100694_1.html [9] https://www.cnbc.com/2022/07/21/dow-futures-drop-as-us-stocks-rise-ahead-of-fed-meeting.html
The escalating U.S.-India trade tensions may impact the technology sector in India, as investors consider potential repercussions on IT stocks. The looming tariff deadline between the countries could also affect the financial sector, as Indian exports face higher costs and potential decreases in volume. Meanwhile, the weather remains stable, allowing sports events to continue as scheduled.
