Samir Arora, founder of Helios Capital Management, was bang on when he said on Thursday — a day after Trump’s reciprocal tariff bombshell on April 2 — that the day’s “market behaviour is a bit suspicious, not to be trusted”. His response had come in the backdrop of a modest fall in the benchmark indices on that day, leading many to say it signalled that India was in a relatively better position than other nations as far as the tariff blow is concerned.
The fond hopes proved short-lived, with Indian market indices witnessing a bloodbath on Monday, with the Nifty now down 17% from its peak and is less than 1,000 points away from officially entering the bear market territory. Both benchmarks posted their worst single-day decline since June 4, 2024. Volatility hit the roof, as NSE’s India VIX index jumped a record 65.63% to close at 22.79 — the highest closing since June 4, 2024.
Indian equities, of course, mirrored the sharp declines across global markets The Nasdaq has already officially entered a bear market — down around 23% from its December highs. The Dow isn’t far behind, trailing with a 15% slide. Asian equity markets sank and European shares crashed to a 16-month-low. Some investors liken the market turmoil to “Black Monday” — the largest single-day drop in Dow Jones history, when the index crashed 23% in October 1987 amid persistent trade and budget deficits in the US. Echoes of that panic are surfacing again, underscoring the rising global uncertainty.
The biggest problem is no one seems to have a clear sense of how this turbulence will unfold as there are so many moving parts. Investor anxiety and the threat of further losses across asset classes remain high after China retaliated with its own tariffs on Friday. That adds to risks of a broader trade war and tit-for-tat measures that may roil supply chains and slow economic growth. It also threatens to accelerate selling by global funds who have already pulled $14 billion from Indian markets this year. US President Donald Trump’s aggressive trade push has also drawn comparisons to the 1930 Smoot-Hawley Tariff Act, which worsened the Great Depression by sparking retaliatory tariffs worldwide.
The echoes of history are not lost on economists. Many warn that Trump’s plan could backfire, sparking a global trade war with devastating effects on growth. Major financial institutions are growing increasingly concerned. JP Morgan has raised its probability of a global recession from 40% to 60%. Goldman Sachs followed suit, revising its estimate from 20% to 35%. The aggressive tariff policy is raising costs for manufacturers and consumers alike, and economists warn this could trigger inflation without corresponding growth — a classic case of stagflation.
All this is bound to affect India. Monday’s sectoral losses highlight the breadth of investor anxiety, particularly over India’s global linkages which are facing potential disruption from retaliatory trade measures. While there is obviously a downside risk to FY26 economic growth, the impact will be more pronounced through the indirect channel of weaker corporate confidence, which will dent the risk appetite and further defer the capex cycle. Listed Indian companies are likely to see earnings and valuations come under increasing pressure. No wonder, data suggests fresh short positions being built as stock traders brace for further declines. However, investors should not panic as Indian markets have seen many such cycles and rebounded after a short-term pain.
