Indian stock market indices, Nifty 50 and Sensex, have experienced a decline and significant volatility in the recent months, due to worries about the impact of US tariffs on economic growth. Donald Trump’s 50% tariff has negatively affected earnings forecasts and triggered outflows of foreign investments. Up until 2 September 2025, foreign portfolio investors (FPI) have divested ₹141,270 crore, according to data from NSDL.
As per analysts, the primary factor driving this notable selling trend among foreign investors is the relatively elevated valuations in India when compared to other markets. Consequently, making them shift their investments to markets offering lower valuations.
Nevertheless, market experts identify several additional factors, aside from the Trump Tariff, that will dictate the Indian stock market in the future.
Mohit Gulati, the CIO and managing partner of ITI Growth Opportunities Fund believes that beyond Trump’s tariffs, the real triggers dictating India’s stock market remain far more fundamental such as corporate earnings momentum, domestic and global investor sentiment, valuation re-ratings driven by PE expansion, macro stability across inflation and growth, and currency resilience. These levers ultimately outweigh any short-term geopolitical noise — because in the end, markets reward fundamentals, not headlines.
Check out top 5 triggers beyond trump tariffs
Inflation and bond yields
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd believes that the Inflation and bond yields in the US will have an influence on the Indian stock market.
As per Reuters reports, a worldwide decline in long-term bonds continued into Asia on Wednesday, with Japanese yields reaching an all-time high while gold achieved a new record as rising worries about government debt and economic growth unsettle investors.
Bond yields, particularly for super-long 30-year maturities, have surged globally, as investors express concern over the substantial debt levels in nations ranging from Japan to the United States. The yield on the 30-year Japanese government bond (JGB) reached an unprecedented 3.255%, following a rise in similarly matured gilts and Treasuries on Tuesday, according to reports.
Stagflation in US
Vijayakumar believes that there is an increasing possibility of stagflation in US in the rest of 2025. This will have implications for global growth and global markets.
Brokerage firm Nuvama Institutional Equities points out that typically, a narrowing US CAD indicates a slowdown in global growth. With Indian corporations strongly tied to the global economy through either end-demand or prices (around two-thirds of India Inc’s revenue is directly or indirectly linked to global demand), their growth begins to decelerate. This results in an overall economic slowdown, which could lead to an increase in defaults and cause banks to be more cautious. Consequently, this amplifies the downward trend.
GDP growth
Vijayakumar highlighted that GDP growth trend in India is likely to influence the market significantly. The 7.8% Q1 GDP numbers indicate growth momentum in the economy. If this sustains, the market can rally.
GST reforms
According to Dr. VK Vijayakumar, reforms in India are on a fast forward mode. After the fiscal stimulus provided in the Budget and the big rate cuts by the MPC the Government is accelerating reforms by rationalising GST. This can give further fillip to demand, growth and earnings.
MPC Repo cuts
Vijayakumar highlighted that another factor to watch for is the rate action from the MPC. Low inflation may warrant yet another rate cut. But given the high Q1 GDP growth numbers, this need not happen.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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