Risk Assets Brace For Crucial Trump-Modi Talk As Analysts See India At Threat

Prime Minister Narendra Modi, who is headed to the United States, will be meeting President Donald Trump this week. The meeting, which comes under the cloud of tariffs, remains crucial not only for Indian trade and economy, but also for the risk-bearing assets.

The meeting comes in the backdrop of Trump stirring panic among several economies, with his threats of slapping high tariffs on imports.

Although India has not faced any direct impact of Trump's tariff announcements so far, economists see the country, along with its Asian peer Thailand, as among those emerging economies who are at risk.

The Asian economies are expected to step up their negotiations with Trump, Nomura analysts led by Sonal Varma said in a note. India is considering reducing tariffs on over 30 items and preparing to increase purchases of US defense and energy, the note said.  

India has a 9.5% weighted average effective tariff on US exports to India versus a 3% tariff rate on India’s exports to the US, Nomura said, adding that, "so far, India has been trying to avoid confrontation."

Stock markets globally are reeling under pressure as Trump's tariff threats have kept investors on the edge. The dollar has been on the rise along with the US treasuries.

In his latest move, Trump unveiled plans to impose a 25% tariff on all imports of steel and aluminum. He said the tariffs would apply to import of the metal from all countries.

This comes after a series of threats against Mexico, Canada and China. While tariffs on Mexico and Canada are on hold, China’s retaliatory tariffs on US goods have taken effect.

These developments come as Modi is reported to meet his counterpart this week in Washington to discuss the future relationship of the close allies. From ensuring the return of undocumented Indian migrants to cutting import duties of key US goods in the Union Budget, Modi has shown that India is ready to engage with Trump.

Sridhar Sivaram, investment director at Enam Holdings, notes that the US tariff policies have already begun to affect emerging market currencies, which could see further depreciation if these policies continue.

Stocks and currencies in India have already taken a beating with more volatility on cards. The rupee plunged to an all-time low of 87.92 on Monday, forcing the Reserve Bank of India to sell dollars to tame down the volatility.

The rupee became the worst currency in Asia in 2025 so far from the most stable one in previous years. In his recent policy speech, RBI Governor Sanjay Malhotra said that interventions in the forex market will focus on smoothening excessive and disruptive volatility and not targeting any level of the rupee.

The central bank has been intervening heavily in the market since Monday, traders familiar with the development told NDTV Profit as speculation grew that the rupee might touch 90 against the US dollar.

Indian stocks, meanwhile, are still reeling under bearish pressures given the global trade tensions. Despite the positive developments from the Union Budget and RBI rate cut, Indian stocks remained cautious, with NSE Nifty 50 and BSE Sensex down over 1.5% since the budget.

Both benchmarks declined on key events, while small and mid-cap stocks also lacked optimism. India's metal stocks took a nosedive after Trump's latest tariff on steel and aluminium goods.

While global funds have been offloading the rupee and the stocks massively, domestic gilts and the safe heaven gold are, however, finding strong takers.

Global funds have bought government bonds worth Rs 16,315 crore in the first 10 days this month, the highest since September 2023. Under the fully accessible route, foreign institutional investors have bought gilts worth Rs 24,507 crore, according to the data from NSDL.

Bullion has been consistently on a record-hitting streak with the yellow metal touching all-time high of Rs 86,000 per 10 grams on Feb. 11. Climbing nearly Rs 880 compared to the previous week, domestic gold prices have seen a hike due to the escalating global tension.

India is exploring options to strike a deal with the US to avoid higher reciprocal tariffs in the near term, with reports suggesting a timeline to agree upon a “mini” trade deal, Nomura said. Over the medium term, it is looking to engage with the US and attract more supply chains into the country.