Budget Impact, Trump Tariff: What to expect in trade today

The Sensex and Nifty ended flat on Budget Day as investors assessed Nirmala Sitharaman's consumption-boosting measures alongside concerns over muted hike in capital expenditure.

The Indian stock market is set for a gap-down opening on February 3, as investors weigh the implications of the Union Budget 2025 alongside the impact of first leg of import tariffs imposed by the Trump administration in the US.

As of 7.49 am, GIFT Nifty futures were trading at 23,380, down 248 points or 1.05 percent, hinting a start in the red for the session ahead.

Global markets had hoped that Trump’s tariff threats were more bark than bite, but the US president proved otherwise, delivering on his hardline trade stance. Contrary to expectations of a more measured approach, Trump went ahead with sweeping tariff hikes, hitting Canada, Mexico, and China first. Imports from Canada and Mexico now face a steep 25 percent tariff, except for Canadian oil and gas, which are subject to a 10 percent duty, while Chinese imports have been slapped with a 10 percent levy.

The response from affected nations was swift, opening the doors for an imminent trade war. Canada retaliated with 25 percent tariffs on $155 billion worth of US goods, including Tesla vehicles, while Mexico and China also announced their own counter-measures, setting the stage for escalating trade tensions.

Concerns of escalating trade tensions across major economies took global markets with a storm. Futures tied to the Dow Jones Industrial Average dropped more than 450 points while markets across the Asia-Pacific opened with sharp cuts in today's trade.

Australia’s S&P/ASX 200 slid 1.61 percent, while Japan’s Nikkei 225 and Topix declined 1.99 percent and 1.87 percent, respectively. South Korea’s Kospi tumbled 2.52 percent, with the small-cap Kosdaq down 2.79 percent. Hong Kong’s Hang Seng Index also fell 1.23 percent at the open.

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Meanwhile, India seems to have dodged a bullet, narrowly avoiding tariff impositions. President Trump has frequently labeled India as a tariff abuser, leaving it vulnerable to potential future tariffs.

Even though India averted the first set of tariffs, complacency cannot kick in yet. The government also seems to be taking stock of the evolving trade tensions with the arrival of Trump.

In response, the latest round of import tariff revisions announced in the Budget has significantly reduced the peak tariff rates from 150 percent to 70 percent. Additionally, import duties on the top 30 items exported by the US to India, including crude petroleum, coking coal, airplanes, and liquefied natural gas, have been kept minimal, ranging from zero to 7.5 percent. Prime Minister Narendra Modi is also set to visit the US in February, which the market will be tracking closely.

While developments on tariff front will remain on the radar for the market, investors will also be assessing the impact of the recent Budget announcements. Finance minister Nirmala Sitharaman unveiled a slew of measures to spur consumption in the budget 2025, however, concerns over muted capital expenditure hike weighed on investor sentiments.

The market was clearly not enthusiastic about a slowdown in capex, with many taking it as a signal of the government shifting the onus of demand creation towards the private sector and consumers. Looking ahead, Sandeep Bagla, CEO, TRUST Mutual Funds believes that the private sector is unlikely to undertake large capex due to uncertainty over tariff wars and fears of dumping form China. "It puts growth outlook under a cloud in the short run," he says.

As a result, the Sensex and the Nifty ended the session on the Budget day on a flattish note.

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