The proposed US bill to punish the countries that continues to buy Russian oil with tariffs of up to 500% has raised concerns in India's financial markets about the possible impact on the economy and stock market.
Market experts say the situation could turn serious if tariffs are increased further or extended beyond goods to the services sector, which is a key strength of India’s economy.
However, analysts also caution against jumping to conclusions too soon. Much will depend on how the legal and political process unfolds in the US.
VK Vijayakumar of Geojit Investments, said investors should wait for more clarity, especially with the US Supreme Court expected to give an important ruling on tariffs on Friday.
He warned that very high tariffs, such as the proposed 500 percent rate, would be a major negative for both the economy and the markets. Even with the current 50 percent tariff, sustaining India’s growth momentum could become difficult if uncertainty continues for a long time.
Vijayakumar also pointed out that India currently enjoys a trade surplus of around $41 billion with the US. If the tariff dispute remains unresolved, this surplus could widen further. That may put pressure on the rupee, which was already the weakest-performing currency in Asia last year.
A weaker rupee could lead to more foreign investor selling. This can create a vicious cycle, where currency weakness leads to FII outflows, which in turn weakens the currency further.
G Chokkalingam of Equinomics Research, agreed that the sanctions bill is clearly negative. He said a 500 percent tariff would be significant, but its impact may not be uniform across all sectors.
So far, the damage has been limited because many Indian exports are either not directly affected by tariffs or benefit from free trade agreements and diversification into other markets. He believes the situation is manageable as long as the impact is limited to goods. If services are affected, it could become a serious problem.
A more optimistic view comes from Pankaj Pandey of ICICI Securities. He said if cheaper oil is offered by countries like Venezuela, it could actually help India and reduce pressure on trade relations.
Experts say rising geopolitical and economic uncertainty usually supports gold and silver prices. If tariff tensions between major economies like the US, India and China increase, investors may move more money into precious metals.
Jigar Trivedi of Reliance Securities said the outlook for gold remains positive, especially if the rupee weakens further. The RBI’s actions in the forex market will play a crucial role.
Anuj Gupta, an analyst, said higher tariffs could also push up inflation globally, which is positive for gold and silver in the long run. While some short-term correction is possible, buying interest is expected to return near key support levels.
Overall, markets are likely to remain cautious until there is more clarity on tariffs, court rulings and future trade negotiations.
(By arrangement with livemint.com)
