Sensex, Nifty Dip as U.S. Draft Tariff Notice Triggers Market Jitters

Benchmark indices Sensex and Nifty dropped sharply in early trade on Tuesday (August 26, 2025), after the United States issued a draft notice on implementing an additional 25% tariff on Indian imports.

Market mood was further weighed down by persistent foreign fund outflows and weak trends across Asian markets.

Market Opening and Key Movers

The 30-share BSE Sensex fell 606.97 points, or 0.74%, to 81,028.94 in the opening session. Similarly, the 50-share NSE Nifty slipped 182.25 points, or 0.73%, to 24,785.50.

Among the laggards in the Sensex pack were Sun Pharmaceutical, Tata Steel, Adani Ports, ICICI Bank, Bharti Airtel, Power Grid, Bharat Electronics Ltd, HDFC Bank, NTPC, and Tata Motors. Hindustan Unilever and Tata Consultancy Services were the only gainers.

Tariff Implementation Timeline

On Monday (August 25, 2025), the United States issued a draft order to impose additional tariffs, which President Donald Trump had announced earlier. These tariffs will take effect from August 27.

According to the Department of Homeland Security’s notice, the levies will apply to Indian products “that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 am Eastern Daylight Time on August 27, 2025.”

The draft stated that the higher tariffs were linked to “threats to the U.S. by the government of the Russian Federation,” with India included as part of that strategy.

Market Experts’ View

Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, said, “The biggest headwind for Indian markets remains whether Nifty can scale the ‘Wall of Worry’ around the 50% Mr. Trump tariff set to kick in on August 27, which threatens to make almost all of India’s $86.5 billion exports to the U.S. commercially unviable.”

He further noted that RBI Governor Sanjay Malhotra has assured policy intervention if the new tariffs negatively impact domestic growth.

Global Market Performance

Across Asia, Japan’s Nikkei 225 index, South Korea’s Kospi, and Hong Kong’s Hang Seng traded lower, while Shanghai’s SSE Composite Index showed positive momentum.

On Wall Street, U.S. markets ended Monday’s session in the red.

Foreign Institutional Investors (FIIs) remained net sellers, offloading equities worth ₹2,466.24 crore on Monday (August 25, 2025), as per exchange data.

Liquidity and Valuation Factors

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, remarked, “Despite sluggish earnings growth and headwinds like high tariffs, the market continues to be resilient. Resilient market co-existing with tepid earnings growth has made India the most expensive market in the world.”

He added that sustained Domestic Institutional Investor (DII) buying has countered the FII selling.

“Since the principal reason for the market’s resilience is liquidity and liquidity flows are likely to sustain, the market is unlikely to correct significantly, and the elevated valuations may continue,” he explained.

Brent Crude and Rupee Movement

Global oil benchmark Brent crude slipped 0.48% to USD 68.47 per barrel.

Meanwhile, the rupee weakened by 22 paise to 87.78 against the US dollar in early trade on Tuesday, tracking the tariff draft notice.

At the interbank foreign exchange market, the rupee opened at 87.74, later dropping to 87.78 compared to the previous close of 87.56. During the session, it touched a high of 87.69.

Forex traders said demand for the dollar rose as importers hedged against the looming tariff hike.

Expert Analysis on Rupee Pressure

Amit Pabari, Managing Director at CR Forex Advisors, noted, “With the bias still tilted toward depreciation, the rupee has already breached the 87.50 mark. The next hurdle stands at 87.80, a level where the RBI has often acted as a strong barrier against further weakness.”

He also pointed out that hopes for relief diminished after reports of Ukraine-Russia peace talks stalling, signaling Washington’s hard stance on tariffs is unlikely to soften.

Dollar Index and Global Cues

The U.S. dollar index, which tracks the greenback against six major currencies, fell 0.05% to 98.38.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said, “The US dollar index dipped a bit after President Trump fired Federal Reserve Governor Lisa Cook over alleged mortgage fraud, a move that has heightened concerns over the FED Reserve’s independence.”

Brent crude futures also slipped 0.41% to USD 68.52 per barrel, as traders assessed prospects of further U.S. sanctions on Russia against fragile hopes of peace talks in Ukraine.