Trump announced on Truth Social that he plans to increase tariffs on India. This decision follows India’s purchase of large quantities of Russian oil and its subsequent sale on the open market.
India has been engaging in these transactions amidst the global economic shifts. The tariff increase is intended to respond to India’s trade activities involving Russian oil.
Impact On Indian Market
The announcement from Truth Social injects immediate and significant uncertainty into Indian assets. The India VIX, a key measure of market fear, has already jumped 12% to 15.5 in early trading, reflecting this nervousness. This makes positions that benefit from rising volatility, such as long straddles on the Nifty 50 index, a primary consideration.
We see the Indian Rupee as particularly vulnerable to this pressure. The currency weakened past 85 to the U.S. dollar this morning, a level not seen since the brief market turmoil in late 2024. Considering India’s central bank has been actively defending the currency, we believe buying out-of-the-money call options on the USD/INR pair is a sound strategy to profit from expected depreciation.
This tariff threat directly challenges the recent rally in Indian equities. We remember the market reactions during the 2018-2019 trade disputes, where headline risk frequently caused sharp, single-day drops in the major indices. Protective puts on the Nifty 50 or on Indian-focused ETFs should be evaluated to hedge existing long positions.
Industry Sectors At Risk
Specific sectors like information technology and pharmaceuticals are at the greatest risk, as they are major exporters to the U.S. market. These two sectors alone accounted for over $80 billion in exports to the U.S. in the 2024 fiscal year, making them highly sensitive to any new trade barriers. We are looking at bearish option strategies on individual companies within these sectors that have the highest reported revenue from North America.
The situation could also create a short-term spike in oil prices. India has been importing Russian crude at a record pace, hitting 2.3 million barrels per day in May 2025, and then exporting refined products. Any disruption to this major trade flow could tighten global supply, making call options on WTI or Brent crude futures an interesting, albeit contrarian, play on the fallout.
