The Indian stock market faced a steep sell-off on Friday, April 4, with benchmark indices plunging sharply. The Sensex tumbled over 800 points, and the Nifty 50 slipped below 22,950, weighed down by weak global cues. This decline followed a day of resilience in the domestic market despite global market volatility.
A significant contributor to investor anxiety has been the announcement by US President Donald Trump regarding new tariffs on sectors like pharma. While Indian pharmaceuticals were initially exempted, media reports indicate that Trump is considering imposing duties on pharmaceutical imports as well.
Although experts believe these tariffs may not have a direct impact on the Indian economy, uncertainty surrounding their broader implications is dampening market sentiment.
Sector-Wise Impact and Investment Strategies
Top analysts share the sectors that may win and lose from the reciprocal tariffs imposed by Donald Trump on India:
Auto and Auto Parts: Facing Uncertainty
The automobile sector is vulnerable, particularly companies that export auto components to US-based manufacturers such as GM, Ford, and Tesla.
“There are several manufacturers in India that export auto parts to GM, Ford, and Tesla, and they rely on exports for more than 50 per cent of their revenues. Even though they are not explicitly included in this round of tariffs, they were previously part of Section 232 tariffs,” noted Sreeram Ramdas, VP, Green Portfolio. Given the uncertainty, investors should approach the sector with caution until more clarity emerges.
Capital Goods and Chemicals: Short-Term Headwinds
Trump’s tariffs could negatively impact manufacturers in capital goods and chemicals, which are highly export-dependent.
“This would impact the earnings and margins of manufacturers in the capital goods space, chemicals, seafood exports, and textiles in the short term,” said Ramdas. The sector’s performance will depend on global trade policies and potential countermeasures from India.
Metals and Steel: Cyclical Pressure
The metals sector is another area that may come under pressure. “Defensive stocks (FMCG, utilities) may outperform, while cyclical sectors (autos, metals) could underperform,” said Pranay Aggarwal, Director & CEO, Stoxkart. He added that long-term implications hinge on negotiation outcomes, but near-term caution is advised.
Textiles: Struggling Amid Export Tariffs
Indian textile exports, which contribute significantly to global supply chains, could face headwinds from US tariff measures. “Key export-oriented sectors like electronics, textiles, gems & jewellery, auto parts, and processed foods face headwinds due to steep US duties,” said Anirudh Garg, Partner and Fund Manager at Invasset PMS. Given these pressures, textile stocks could remain underperformers in the near term.
FMCG and Utilities: Defensive Bets
In times of economic uncertainty, defensive stocks tend to perform better. “Investors should monitor retaliatory actions and sector-specific exposures. Defensive stocks (FMCG, utilities) may outperform,” Aggarwal said.
Banking and Financials: A Safe Haven
Banking and financial services, particularly those with minimal international exposure, could offer stability in this volatile environment. “Investors should focus on sectors with minimal or no dependency on international trade. Non-lending financials, banks (both PSU and private), and domestic consumption sectors remain strong investment themes,” suggested Vishal Bajaj, Director – Wealth, Client Associates. With consistent domestic growth, the banking sector could provide a solid investment opportunity.
Balancing Caution with Opportunity
The US tariff concerns have introduced volatility into the Indian stock market, with certain sectors poised for headwinds while others could emerge stronger. The pharmaceutical sector appears to be one of the few beneficiaries, while auto, metals, and textiles face immediate pressures. Defensive sectors like FMCG and utilities offer a safe harbor, while banking remains a stable long-term bet. Investors should maintain a diversified portfolio and closely monitor policy developments to make informed decisions amid evolving global trade dynamics.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.