DeepSeek scare, Trump tariff threats: How worried should Indian stock investors be? Experts weigh in

A host of factors, such as subdued corporate earnings, decelerating economic growth, China's economic stimulus measures that triggered an exodus of FIIs, a hike in interest rates by Japan that led to the unwinding of yen carry trades, and an increase in US bond yields, are some of the major factors that have caused a huge sell-off in the domestic market.

Besides, geopolitical tensions and the crisis in the Middle East, too, have kept traders on the sidelines.

In addition to these existing headwinds, the latest scare in the form of DeepSeek, which led to the rout in tech stocks on Wall Street in the last session, as well as US President Donald Trump's threats on tariffs on different countries, have kept market participants on tenterhooks.

The announcements rattled stock markets across the globe, including India.

Commenting on the current situation, Sreeram Ramdas, Vice President at Green Portfolio, says that the US markets are well equipped with liquidity, and mostly tech, chip, and AI-related stocks are taking a beating while the broader market in the US remains intact.

"On Trump’s plans to reform taxes, he, in his speech, was referring to balancing the potential loss of taxation income with an increase in tariffs. The increase in tariffs theme is what’s impacting the Indian markets. This will detrimentally impact India in the short and medium term, especially auto component and medical appliance exports. Just during the last nine months, we exported $60 billion worth to the US," Ramdas said.

The market expert, however, added that these are short-term sentiments. Cutting India off from the US supply chain will gravely impact the US economy. For instance, the US is facing a generic drug shortage, a structural one, and India is the world’s largest manufacturer of generic drugs with a 20% global export share. An impact on tech and AI will not impact Indian IT. These Indian IT companies are outsourcing partners mainly, and segment-wise, the reliance for revenue on banking and financial space is much more than tech or AI, Ramdas opined.

DeepSeek's R1 has shown that to build powerful models we do not need too many GPUs and data centers, and thus within the context of Indian markets, those themes and stocks, especially IT stocks, that were propped up based on the perceived AI spending on the GPUs and data centers may witness a deep correction.

"Overall, global sentiments will impact the Indian markets too. It now only appears to be a coupling theme; decoupling doesn't seem to be plausible now. Mean reversion in valuation is already in play," Gupta added.