Benchmark equity indices Sensex and Nifty tumbled in early trade on Thursday after US President Donald Trump announced the imposition of a 25 per cent tariff on all goods coming from India starting August 1, plus an unspecified penalty for buying Russian crude oil and military equipment.
The 30-share BSE Sensex tanked 786.36 points to 80,695.50 in opening trade. The 50-share NSE Nifty tumbled 212.8 points to 24,642.25.
The announcement is being seen as a pressure tactic to get New Delhi to agree to demands made by the US, which has, in recent days, got favourable trade deals with major partners like Japan, the UK and the European Union.
The penalty was announced as India has made large purchases of oil and military equipment from Russia. India is the first country to face a penalty for Russian imports.
"The 25 per cent tariff on India, plus an unspecified penalty for energy and defence-related purchases from Russia, is very bad news for Indian exports and thereby on the growth prospects of the Indian economy in the short run. Since trade negotiations with India are continuing, perhaps the 25per cent tariff may come down eventually.
"But certainly, there is a short-term hit to Indian exports and GDP growth. This short-term hit will reflect in the stock market, too, in the short-term," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.
From the Sensex firms, Reliance Industries, Tata Motors, Mahindra & Mahindra, Bharti Airtel, Titan and State Bank of India were among the biggest laggards.
However, Eternal, Hindustan Unilever, ITC and Power Grid were trading higher.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 850.04 crore on Wednesday, according to exchange data.
In Asian markets, South Korea's Kospi, Shanghai's SSE Composite index and Hong Kong's Hang Seng traded lower while Japan's Nikkei 225 index quoted in positive territory.
The US markets ended mostly lower on Wednesday.
Global oil benchmark Brent crude dipped 0.19 per cent to USD 73.10 a barrel.
On Wednesday, the Sensex climbed 143.91 points or 0.18 per cent to settle at 81,481.86. The Nifty went up by 33.95 points or 0.14 per cent to 24,855.05.
