Donald Trump’s tariff tidal wave has jolted global markets, but in India, the impact is playing out unevenly. IT stocks are getting hammered, while pharma stocks are enjoying a strong rally. The Nifty Pharma index surged 3%, but IT stocks tanked as much as 9%, dragging the Nifty IT index down by 4%.

Despite the turbulence in sectoral indices, the broader Indian market held its ground. The Sensex dipped only about 200 points, defying the sell-off seen in global markets. Market breadth remained positive, with small- and micro-cap stocks dodging the volatility. In stark contrast, Nasdaq futures slumped 3%, China’s Hang Seng shed 2.5%, and Japan’s Nikkei plunged nearly 3%, with India looking like an oasis of calm amid global market carnage.

Why Pharma Is Soaring and IT Is Sinking

The reason for this divergence is clear: Trump’s sweeping tariff hike spares Indian pharmaceuticals but spells trouble for IT firms. While India faces a 26% tariff on most exports, pharma has been exempted—a critical win for a sector that supplies over 40% of the US’s generic drug demand.

The IT sector, however, isn’t as lucky. Tariffs aren’t the direct issue here—it’s the risk of an economic slowdown in the US. Higher costs and potential retaliatory tariffs could squeeze American corporate profits, triggering spending cuts on outsourcing and IT services.

“The big loss will eventually come in the form of US discretionary spending, which can have medium-term consequences for the economy if the tariff war heats up. This eventually may lead to some impact for IT firms,” global brokerage firm Bernstein warned.

That’s why brokerage houses are making swift sectoral calls. “We upgrade healthcare to equal-weight, given its limited impact, and downgrade IT to equal-weight as the U.S. recession risk rises in the wake of these measures,” Bernstein said.

Also read | Trump tariff tidal wave hits markets: Why India may dodge the trade bullet

Winners and Losers: Sector-Wise Breakdown

HDFC Securities’ Devarsh Vakil outlined the shifting landscape: “Trump’s tariffs don’t impact local businesses broadly but will weigh on export-heavy sectors. Indian pharma stocks with significant U.S. revenue remain unscathed, while IT is vulnerable to an economic slowdown.”

Among the biggest pharma winners are Sun Pharma (32% U.S. sales), Torrent Pharma (10%), Piramal Pharma (41%), Zydus Life Sciences (46%), Gland Pharma (50%), Aurobindo (48%), and Dr. Reddy’s (47%).

IT: Indian software giants such as TCS, Infosys, and Wipro are staring at headwinds if US corporate clients pull back on spending.

Metals: Steel/Aluminum already have 25% tariffs on imports, which will continue hence exempted from reciprocal tariffs. No new impact from reciprocal tariffs.

Autos and Auto Ancillaries: Autos and auto parts are already subject to Section 232 tariffs and are exempt from additional reciprocal duties. Tariffs of 25%, which were already announced but implemented effective 2nd April. No additional negative impact from reciprocal tariffs.

Textiles: India will have two-way impact of these reciprocal tariffs, 1st higher tariff on competing nations to support market share gains, as China, Bangladesh & Vietnam are levied at much higher rates of 34%, 47% & 46% respectively, compared to 26% on India. Secondly, the increase in prices to end consumers will reduce the overall demand, shrinking the market size, said Manish Jain, Chief Strategy Officer & Director, Mirae Asset Capital Markets.

He said textiles typically have a price elasticity of demand between -1.2 to -2.0, meaning a 10% price increase leads to a 12-20% decrease in quantity demanded.

Markets were banking on Fed rate cuts. But if inflation rises due to tariffs, those cuts may get delayed—hitting risk appetite for tech stocks globally, analysts say.

“The broader market is likely to experience near-term volatility. Tariffs across multiple geographies mean higher input costs globally, which could push US inflation higher and complicate the Fed’s rate cut trajectory—something the markets had been relying on. As a result, equities may remain under pressure, especially sectors sensitive to global demand and trade,” Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, said.

Also read | Trump tariff hike hits Dalal Street: 4 sectors facing the biggest impact, global brokerages decode

Trump’s Strategy: ‘Liberation Day’ or Trade War 2.0?

April 2, 2025, will be remembered as a turning point in U.S. trade policy. Dubbed “Liberation Day” by Trump, the tariff hike introduced a 10% baseline duty on all imports and country-specific reciprocal tariffs on nations with “unfair” trade practices.

India’s 26% tariff, though significant, pales in comparison to China’s whopping 54% levy (20% existing + 34% new), Mexico’s 25%, and Vietnam’s 47%.

“While the reciprocal tariff on India is negative for domestic exporters, higher tariffs on China, Mexico, and Canada will open up market share opportunities for Indian players in the U.S.,” Jain of Mirae Asset noted.

That’s precisely why textile stocks have been holding up despite the higher duties. “China and Vietnam, which had a market share of 21% and 19% respectively, now face significantly higher duties, making Indian exports more competitive,” said Vakil. However, he cautioned that overall demand could shrink due to higher prices for end consumers.

What’s Next? Key Risks to Watch

Anirudh Garg, Partner and Fund Manager at Invasset PMS, highlighted the broader macroeconomic risks. “Given the significant increase in tariffs on major trade partners and expected retaliation by other countries, inflation will increase, which will lead to a global economic slowdown. This will even increase the recession probability in the U.S. Also, in an inflationary environment, the Fed might delay rate cuts. Gold, crypto, and bonds will gain traction while equity markets will remain volatile.”

While India seems better positioned than its peers, the risks are far from over as China’s retaliation could flood global markets with excess supply, undercutting Indian manufacturers.

The U.S. recession risk looms large. Emkay Global warned: “Trade-led U.S. recession takes everyone down. There are no real winners—not even relative ones.”

Besides, higher U.S. tariffs could squeeze corporate margins and push inflation up by 1.5%, derailing Fed rate cut expectations.

“The ramifications of Trump's reciprocal tax on Indian imports will be felt across infrastructure, business, and the economy of India as a whole. While it is true that most domestic businesses will be insulated, U.S.-dominated markets will witness severe disruptions. This policy poses immediate risks to Indian exporters in the IT and textile sectors that depend on the U.S. market for business,” Palka Arora Chopra, Director at Master Capital Services said.

For India, the challenge is navigating U.S. trade policies while capitalizing on China’s setbacks. The opportunity is real, but execution is key. Investors are already making their bets—pharma over IT, defensive over cyclical. The next few months will decide if India can truly turn Trump’s trade war into a golden opportunity.