Why didn't Indian stock market crash despite Trump's tariffs on India? Explained with 5 reasons

Indian stock market: A sharp wave of selling pressure swept through the Indian stock market on Friday, August 8, pulling the key benchmarks down by around 1% each.

The Sensex fell 765 points, or 0.95%, to settle at 79,857.79, while the Nifty 50 declined 233 points, or 0.95%, ending at 24,363.30. Among the broader indices, the BSE Midcap index slipped 1.56%, and the Smallcap index shed 1.03%.

According to experts, the Indian stock market has stayed steady even after Donald Trump first announced a 25 percent tariff on certain Indian exports and then increased it further to 50 percent. Many expected such a steep hike to cause a sharp market crash, but that did not happen.

The market has remained sluggish over the past six weeks. The introduction of U.S. tariffs — with some rates raised to as much as 50% — triggered an immediate and sharp reaction. Foreign investors responded with heavy selling, with reports estimating FII outflows of around ₹25,000–27,000 crore during the week-long turmoil. The Sensex shrugged off the blow with a steep single-day fall of roughly 765 points but managed to avoid a full-scale breakdown.

“ Beyond flows, the macro cushion mattered. India’s growth rests largely on domestic demand: private consumption is roughly 60% of GDP, not the headline-grabbing 70% often quoted. That means a U.S. tariff tweak bites certain exporters, but it doesn’t topple the economy, the shock was real and painful for some pockets, but market resilience came from homegrown liquidity and a consumption-led economy — a correction, not a collapse,” said Akshat Garg, AVP, Choice Wealth.

Here are five reasons why Indian stock market didn’t crash despite Trump’s tariffs on India –

According to Gaurav Goel, Founder & Director at Fynocrat Technologies said that even with tariffs being raised to 50 percent, the Indian stock market did not crash because the economy is broad-based, resilient, and managed with confidence. While some export businesses will face challenges, the long-term growth story remains intact, and that is what the markets are focusing on.

Goel gave five key reasons why Indian stock market didn’t crash.

Strong domestic demand and manufacturing base

India is a large and diversified economy. While higher tariffs will affect some export sectors, the country’s growth is not dependent on any single market or product. Strong domestic demand, a robust services sector, and a growing manufacturing base ensure that the economy has multiple engines driving it forward, he said.

Higher costs for American businesses and consumers

Goel further said that a 50 percent tariff is not just a challenge for India. It also means higher costs for American businesses and consumers. This can lead to supply chain adjustments and even loss of competitiveness for US companies that depend on Indian goods. In global trade, such measures often hurt both sides, and markets know this well.

Tariffs mainly political move

Goel highlighted that this hike in tariffs is widely seen as a political move rather than a purely economic decision. The fact that it stems from India’s oil trade with Russia, something other countries also do, has made investors view it as more of a short-term geopolitical tantrum than a permanent structural threat. This perception reduces panic and keeps sentiment steady.

Indian govt remained confident

He further said, “ Another factor is India’s confident response. Instead of panicking, the government has stood firm and maintained a steady stance. This sends a strong signal to investors that India is capable of managing geopolitical and economic pressures without compromising long-term growth goals.”

DIIs strong support

Strong support from domestic institutional investors has cushioned the markets. Consistent buying by these investors shows that they believe in India’s economic fundamentals and see such tariff-related headlines as short-term noise rather than a structural risk, Goel said.

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