Trump Tariffs Trigger INR 11.3 Lakh Crore Erosion in Indian Markets

April witnessed a sharp setback for Indian equity markets, with investors seeing the wipeout of INR 11.3 lakh crore in market capitalization among BSE-listed firms. The turbulence started with the escalation of global trade tensions, which was followed by the U.S. announcing, instead of a negotiated solution, a series of aggressive tariffs targeting multiple countries, including India and China.

Between April 2 and mid-April, the BSE Sensex suffered a decline of 1,460 points, reflecting a 1.9% drop. The total market cap of listed companies went down from INR 412.98 lakh crore to INR 401.67 lakh crore, highlighting the depth of investor anxiety.

India Caught in US-China Crossfire

Although the most recent tariffs were directed at China, Indian imports took a hit as the U.S. slapped on a 26% duty. In turn, the Indian markets were jolted as Chinese authorities responded to the tariff hikes by levying 125% on a range of U.S. exports. While no one is sure how this will end, the announcement stoked fears that this is morphing into a full-on trade war, with global ramifications. Even though the Indian markets have proven to be more resilient than some others, we have not been insulated from the increased volatility that this is causing.

Temporary Relief Fails to Calm Nerves

The decision by the U.S. administration to put a hold on the tariffs for 90 days brought some instant relief. While it didn’t include China, it did cover most of America’s other trading partners, which are responsible for a lot of the trade going on across the globe. That announcement actually brought a lift to the market, with the Indian benchmark indices, and a few other global indices, bumping up by almost 2%. Then again, even with this temporary pause, people are still concerned about the trade situation and what it means for corporate profits, especially if these trade squabbles end up dragging the U.S. into a recession.

Eyes on FY26 for Recovery Prospects

The second half of FY26 could turn out to be a vital watershed for the Indian stock market, not just for equities but for the entire capital market. If global conditions stabilize and corporate earnings show signs of revitalization, Indian equities could regain momentum in the second half of FY26. Despite the current atmosphere of unsettling challenge, the Indian macroeconomic fundamentals hold solid, with attractive valuations that could trigger inflows from long-term investors abroad.

In the immediate term, the market is seen as highly susceptible to swings in sentiment. It could just as easily trend downward as upward. A downward trend would likely see a broad swath of stocks head lower. Conversely, a period of upward movement would likely be concentrated in a narrow band of stocks. That means, in all probability, U.S. equity investors are going to have to steel themselves for more volatility in the upcoming weeks.