Indian shares tumble as trade war shockwaves reach Mumbai

NEW DELHI: Indian shares dropped on Monday after US President Donald Trump imposed sweeping tariffs on Canada, Mexico and China, spurring concerns of a broader trade war.

The Nifty 50 was down 0.52 per cent at 23,361.05, while the BSE Sensex shed 0.41 per cent to 77,186.74. Asian and European stock markets slumped as Trump’s tariffs triggered fears of a hit to global growth.

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Ten of the 13 major domestic equity sectors declined on the day, while the domestically focused smallcaps and midcaps lost 2.1 per cent and 0.9 per cent, respectively.

The Indian rupee weakened past 87 per US dollar for the first time as other regional currencies slumped.

“The Trump tariffs could severely disrupt global trade, slowing economic growth worldwide, which is spooking markets,” said Anirudh Garg, partner and fund manager at Invasset Portfolio Management Services.

“Indian markets are at a critical crossroads; the capex-driven sectors are now taking a backseat as their growth momentum has subsided while consumption-linked segments are set to gain,” Garg said.

State-owned companies declined 3.2 per cent, taking their two-session loss to 6.2 per cent and erasing all gains made in the pre-budget rally last week.

Stocks related to the country’s railways and road infrastructure tumbled for a second consecutive day, impacted by the government’s announcement of modest growth in capex in its union budget on February 1.

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Larsen & Toubro slipped 4.6 per cent, extending its decline after a 3.4 per cent loss on Saturday, with JP Morgan describing the muted capex growth in the budget as a sentiment negative for the sector bellwether.

Oil marketing companies Bharat Petroleum Corp and Indian Oil Corp lost 2.4 per cent and 3.6 per cent, respectively, while Hindustan Petroleum Corp slid 5.8 per cent, as analysts flagged concerns over earnings due to the budgeted liquefied petroleum gas (LPG) subsidy.

The metal index fell 1.7 per cent following Trump’s 10 per cent tariff on imports from China, the world’s top metals producer and consumer. On the day, drugmaker Divi’s Laboratories jumped 4.7 per cent on a December-quarter profit beat.

INDIA VOWS TO AVOID PROTECTIONIST SIGNALS ON TRADE

India does not want to give any signal that it is protectionist, the top bureaucrat in the finance ministry said, after slashing import duties on high-end motorcycles, amid US President Donald Trump’s moves on tariffs.

Sunday’s remarks came a day after Trump ignited a trade war with sweeping tariffs on Canada, Mexico and China. None were aimed at India, although Trump had called it a tariff abuser during his election campaign last year.

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“We don’t want to give anybody any signal that we would like to be protectionist,” Finance Secretary Tuhin Kanta Pandey told Reuters in an interview after the budget, unveiled on Saturday.

“Our stance is that we don’t want to increase protection.”

Trade and immigration issues will take centrestage when Prime Minister Narendra Modi meets this month with Trump, whose administration India has sought to placate after his accusations that its tariffs hurt prospects for American firms.

India’s budget cut import tariff slabs, reducing average basic customs duties on scores of items such as raw materials for domestic industries like textiles and automobiles, Pandey added.

Average import tariffs on essential goods, mainly items of food and raw material, range from zero to 5 per cent, while those on capital goods range from 7.5 per cent to 10 per cent, with about 10 items in higher tax categories, he said.

Trade analysts were not convinced the cuts were sufficient, however.

“India’s average tariffs are still much higher compared to the United States, Japan and China,” said Ajay Srivastava, founder of Global Trade Research Initiative, a think tank based in Delhi.

While India was slashing peak rates of basic customs duties used for international comparisons, it was adding various surcharges on imports, implying that the total tax burden remained high, he said.

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Trump’s administration has upped the ante by recently raising the issue of undocumented Indians living in the United States, a topic on which India’s foreign ministry has said it is in dialogue with US authorities.

India slashed custom duties on motorcycles, such as those from Harley-Davidson, with engine capacity of 1,600 cc or more, to 30 per cent from 50 per cent on fully-built imports in the budget, which Pandey said also cut average tariffs to 11 per cent from 13 per cent.

“We should give the right signal for the world, as well as to our own industry,” Pandey added, saying the tariff measures aimed at helping domestic companies initially but would be phased out as those industries developed.