Indian American Depositary Receipts (ADRs) traded on U.S. markets underwent a spurious selloff when U.S. President Donald Trump declared a 25% tariff on imports from India to become effective August 1. The move, which was unexpectedly made by the U.S. administration and justified by them as both a retribution for India’s continued purchases of Russian crude and a reaction to sluggish developments in bilateral trade negotiations, caused shudders among global markets and triggered immediate falls in prominent Indian ADRs.
Bluechip IT-Finance take the hit
Bluechip stocks like Infosys, Wipro, HDFC Bank, ICICI Bank, and Dr. Reddy’s Laboratories were among the worst hit. Dr. Reddy’s ADR on the New York Stock Exchange incurred the sharpest fall, dropping 4.75% to $14.07, an eleven-week low. Wipro ADR fell 1.79% to close at $2.79, while Infosys ADR declined 0.73% to $17.09. Banking majors HDFC Bank and ICICI Bank dipped by 1.35% and 1.41%, respectively The sentiment also carried over to India-specific ETFs, including the iShares MSCI India ETF (INDA) and iShares MSCI India Small-Cap ETF (SMIN), both of which fell about 1.3%.
India to retaliate?
Market analysts blame the selloff on concerns over declining export competitiveness, increased Indian product costs in the U.S., and the possibility of retaliatory action by India. Export-oriented industries such as textiles, pharmaceuticals, and auto components are particularly at risk, with garment and textile stocks already suffering from the announcement.
Rupee weaker, tough days ahead
The rupee also suffered prompt weakness, touching a four-month low as investors expected capital outflows and rupee volatility as a result of the increased policy risk. The government of India reacted by reiterating that it would do whatever is required to defend the economic interests of the nation and safeguard vulnerable sectors, notably exporters, farmers, and MSMEs.
Though some analysts warn that knee-jerk behavior will pass once trade talks are reopened, the shock has heightened risk-off tone in Indian and foreign equity markets. An ongoing U.S.-India trade negotiation is a hope that may one day lead to a compromise, but currently, Indian ADRs continue to show a new era of trade uncertainty and volatility to Trump’s tariff salvo.
