Indian Markets React to Trump’s Tariff Threats: A Deeper Dive
Benchmark equity indices experienced losses on Tuesday, February 24, 2026, driven by concerns over renewed tariffs proposed by US President Donald Trump and weakness in key stocks like Bharti Airtel and IT shares. The Nifty 50 closed down 0.8% at 25,506.5, while the Sensex fell 0.93% to 82,517.6 as of 11:10 AM.
Trump’s Tariffs and India’s Response
Despite a recent US Supreme Court ruling deeming Trump’s tariffs unlawful, the former President announced a 15% temporary global tariff over the weekend, warning against backing away from previously negotiated trade deals. This has understandably rattled market sentiment. However, Jefferies Global Equity Strategy Head Christopher Wood suggests a surprising approach: don’t sell Indian equities, but rather consider buying more.
Wood’s rationale, echoing sentiments from 2024, centers on the belief that Trump’s aggressive trade tactics are often temporary and ultimately not in America’s best interest. He notes a historical pattern – “it pays to stand up to the Donald.” This perspective is particularly relevant given the potential for de-dollarisation among BRICS nations (Brazil, Russia, India, China, and South Africa) as a result of Trump’s confrontational stance.
The AI Factor and Market Underperformance
Interestingly, Wood also highlighted a counterintuitive trend: India’s current market underperformance may be linked to its position as a global leader in AI-reverse trade. He suggests that as long as capital expenditure (capex) in artificial intelligence continues to surge, India may continue to observe relative underperformance. This suggests a complex interplay between global trade dynamics and the burgeoning AI sector.
Beyond Tariffs: India’s Diversification Potential
While tariffs pose a challenge, other factors offer potential for growth. Nilesh Shah, Managing Director at Kotak Mahindra Asset Management Company, pointed to the potential for India to turn into a global leader in aquaculture, boosted by reducing tariffs through the proposed India-EU free trade agreement. This diversification beyond traditional sectors could provide a buffer against trade-related volatility.
Investor Sentiment and Diversification Strategies
Shah also anticipates a shift in retail investor behavior, with increased diversification into assets like gold, silver, multi-asset funds, and fund-of-funds. This suggests a growing awareness of risk and a desire for portfolio resilience in the face of global economic uncertainty.
Sectoral Impact: IT and Telecom Lead the Decline
The immediate market impact was felt most acutely in the IT and telecom sectors. Infosys and Bharti Airtel were significant contributors to the Sensex’s decline, accounting for over 250 points of the loss. Eternal led percentage losers with a near 4% fall, followed by HCL Technologies, TCS, Tech Mahindra, Bharti Airtel, and Infosys, all down around 3%. Conversely, SBI, Power Grid Corporation, and Tata Steel showed marginal gains.
Broader Market Trends
The downturn extended to the broader market, with the BSE MidCap 150 index down 0.8% and the SmallCap 250 declining 1%. This indicates a widespread lack of confidence across different market segments.
Frequently Asked Questions
Q: What is “AI-reverse trade”?
A: This refers to a situation where a country is a major recipient of capital expenditure related to artificial intelligence, potentially leading to a temporary underperformance in its equity markets.
Q: What is Jefferies’ stance on Indian equities?
A: Jefferies remains “overweight” on Indian markets, despite a recent slight reduction in exposure, and views the current market correction as a potential buying opportunity.
Q: What are the potential benefits of the India-EU free trade agreement?
A: The agreement could reduce duties and boost India’s potential to become a global leader in aquaculture.
Q: What are investors advised to do in the current market climate?
A: Investors are expected to diversify their portfolios into assets like gold, silver, multi-asset funds, and fund-of-funds.
Did you know? The US Supreme Court has ruled Trump’s tariffs as unlawful, yet the former President announced new tariffs over the weekend.
Pro Tip: Consider diversifying your investment portfolio to mitigate risk during periods of global economic uncertainty.
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