The Nifty 50 and Sensex each lost more than 2.2% last week, dragged lower by U.S. tariffs on Indian goods. The United on August 27 doubled duties to 50% in response to India’s purchases of Russian oil, stoking fears of stress in export-heavy industries from textiles to metals and auto.
“Indian equities ended lower this week as early optimism was overshadowed by sustained selling amid rising global and domestic headwinds,” said Vinod Nair, head of research at Geojit Investments. He noted that “the subsequent imposition of tariffs on Indian goods further dented confidence, driving profit booking across sectors. Large caps declined, while mid- and small caps saw sharper losses on stretched valuations and heightened uncertainty.”
Foreign portfolio investors pulled about Rs 527 billion from equities in July and August, extending outflows from muted earnings and tariff-related risks. Brokerage Emkay Global said the direct GDP hit from tariffs could be limited to about 0.5% of FY26, but warned of “significant second-order risks to asset quality and employment.”
GDP resilience offers a buffer
India’s economy, however, showed unexpected strength in the June quarter. GDP grew 7.8% year-on-year, well above the 6.7% consensus estimate and higher than the 7.4% expansion in the prior quarter, BofA Securities noted.
“GDP growth of 7.8% for the first quarter of FY26 is encouraging and reconfirms the resilience of the Indian economy in the face of ongoing tariff turmoil and regional wars,” said Ashwini Shami, president and chief portfolio manager at OmniScience Capital.Shami pointed to services growth of 9.3% and a 9.7% jump in government spending as key drivers, while private consumption rose 7%. “The expected pick up in domestic consumption, private sector capex growth and sustained growth in fixed capital formation shall provide sustained economic growth which is a strong positive for the equity markets,” she said.BofA said the strong print “has all but ruled out a rate cut in October,” while maintaining its FY26 GDP forecast at 6.5% due to global risks from tariffs and trade disruptions.
GST Council meeting in focus
Attention now turns to the September 3-4 meeting of the GST Council, where Finance Minister Nirmala Sitharaman will chair discussions on rationalising the tax regime. Markets are betting that a three-tier structure could emerge, with consumption and auto sectors seen as top beneficiaries.
“The next trigger is GST 2.0, with the final contours expected on 5-Sep-25: we see this as a major growth catalyst,” Emkay Global said, reaffirming its Nifty target of 28,000 for September 2026.
Nair of Geojit Investments said consumption-driven sectors—“FMCG, Durables, Discretionary, Cement, and Infrastructure”—remain well positioned to benefit from GST cuts and higher government spending.
Modi visits China
Adding a geopolitical dimension, Prime Minister Narendra Modi met Chinese President Xi Jinping in Beijing on Sunday in his first visit to China in seven years, on the sidelines of the Shanghai Cooperation Organisation summit.
“We are committed to progressing our relations based on mutual respect, trust and sensitivities,” Modi told Xi, according to a clip posted on his official X account.
The meeting comes just days after Washington imposed punishing tariffs, with analysts noting that Modi and Xi are seeking to present a united front against Western pressure.
Outlook
Market watchers expect volatility to persist in the near term, with domestic growth triggers offset by external headwinds. “A resolution of tariff disputes could act as a key catalyst for market sentiment, although the reciprocal 25% tariff is expected to remain in place in the near to medium term,” said Nair of Geojit Investments.
Whether robust GDP growth, fiscal reforms, and geopolitical thawing can outweigh trade risks will be tested when markets reopen in September. For now, Nifty’s slide has left investors weighing whether the domestic resilience story can overcome global turbulence.
Also read | Rs 35,000 crore FII selloff in August. Can GST reforms, tariff relief and a strong GDP print turn the tide?
as a Reliable and Trusted News Source(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
