Stock market: Indian stocks have been going through a rough phase in recent months as the world’s fifth-largest stock market faces heightened uncertainty, driven by Donald Trump’s stop-start tariff policies, which are pushing investors away from risky bets due to concerns about the global economic fallout.

From West to East, all major markets are feeling the heat of Trump’s trade policies, as he makes headlines daily by announcing tariffs on the U.S.’s closest trading partners and threatening reciprocal tariffs on other countries.

These actions are part of his goal to strengthen American manufacturing, but they are unsettling investors, who fear that his policies could drive up domestic prices and potentially slow down the economy, which currently accounts for 25% of the world’s GDP.

While Trump pushes his agenda to “Make America Great Again,” consumers, corporations, and the U.S. Federal Reserve view tariffs through a different lens. They worry that tariffs could strain budgets, slow business growth, and influence interest rate decisions.

These fears have strengthened after Trump said his policies could cause short-term pain and did not rule out a recession amid the implementation of U.S. tariffs, sending U.S. benchmark indices into correction territory on Thursday.

Back in India, as the country grapples with its own challenges, including a slowdown in the economy, weak urban spending, declining corporate profits, and lofty valuations, Trump’s aggressive stance on tariff policies has added another layer of uncertainty, causing Indian blue-chip stocks to trade at multi-month lows. 

Once high-flying, these stocks are now in a sustained free fall, eroding billions of investors wealth as overseas remained net sellers over the last six months (including the current month), withdrawing over ₹3.5 lakh core during this period.

While fears of a slowdown in the U.S. economy persist, concerns are also growing that Trump may announce reciprocal tariffs on India, as he has repeatedly referred to India as one of the highest tariff nations and claimed that selling products in India is relatively difficult.

White House Press Secretary Karine Jean-Pierre on Tuesday criticised India for imposing a 150% tariff on American alcohol and a 100% tariff on agricultural products. If tariffs are imposed on India, experts believe that it could further impact Asia’s third-largest economy, as the economy is expected to hit a four-year low in FY25.

75 large-cap stocks trade 20-60% below recent peaks

Indian large-cap stocks have shown resilience in recent weeks, even as U.S. markets remain under sustained pressure. However, the majority of stocks have lost significant value in the prolonged sell-off, which began in October last year.

According to Trendlyne data, 75 constituents in the BSE Large-Cap Index are now trading 20% to 60% below their recent highs. On Dalal Street, corrections are defined as losses of 10%, while bear markets are marked by drawdowns of 20% or more.

All major Adani Group stocks, including Adani Green Energy, Adani Total Gas, Adani Power, Adani Energy Solutions, Adani Enterprises, and Adani Ports & Special Economic Zone, are down 30% to 60%, with Adani Green Energy leading the losses.

Likewise, five Tata Group stocks—Tata Motors, Tata Consumer Products, Tata Consultancy Services (TCS), Tata Steel, and Titan—have declined 20% to 44% from their respective 52-week highs.

Tata Motors has been the worst hit among the group stocks, ending the last seven months in the red—its longest monthly losing streak in a decade. During this period, the stock plunged from ₹1,179 per share to ₹655, marking a 44% decline. TCS, the largest listed Tata Group stock by market capitalization, has dropped 23% from its recent highs.

The once high-flying PSU stocks, including Indian Railway Finance, Power Finance Corporation, and NTPC, couldn’t escape the recent sell-off, as they are now down up to 49% from their one-year peaks. Other stocks such as Infosys, Reliance Industries and SBI are now down by up to 21%. 

Analysts downplay tariff risks, says Indian large caps look attractive

As Indian stocks witness a sustained decline, global brokerage firms remain bullish on India. Morgan Stanley recently stated that reciprocal tariffs will likely pose only a minor risk, while adding that valuations in large caps have turned attractive after the recent dip.

Another global brokerage firm, Jefferies, also stated that historically, India tends to outperform other emerging markets within 90-180 days following a period of underperformance. It noted that the country’s valuation premium is now closer to average levels, well below its 2024 peak.

With the dollar index down 6% from its peak, FPI flows could potentially reverse, as Jefferies’ FPI ownership tracker indicates that India’s positioning among EM funds is at a decade low.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.