Sectoral Vulnerability and Investor Behaviour During the 2025 U.S.–India Tariff Shock:  Evidence from Nifty Indices and Primary Market Perceptions

Shruti Sanjay Petkar; Ann Jose

doi:10.36948/ijfmr.2026.v08i01.69246

Sectoral Vulnerability and Investor Behaviour During the 2025 U.S.–India Tariff Shock: Evidence from Nifty Indices and Primary Market Perceptions

Author(s)	Ms. Shruti Sanjay Petkar, Ms. Ann Jose
Country	India
Abstract	Trade policy shocks increasingly influence financial markets, especially in emerging economies. The 2025 U.S.–India tariff shock was one such event, marked by abrupt reciprocal tariff escalations by the U.S. government under its revised trade policy framework. This study examines how this shock affected both sectoral market performance and investor behaviour by integrating daily market data from five major Nifty sectoral indices—FMCG, IT, Pharma, Metal, and Chemical—with primary survey responses from 271 Indian investors. Using an event-study methodology, the research analyzes changes in sectoral returns, volatility, Abnormal Returns (AR), and Cumulative Abnormal Returns (CAR) around the key tariff announcement dates of 5 April 2025 and 7 August 2025. Additionally, chi-square tests explore whether awareness, perceived volatility, and understanding of tariff impacts significantly influence investment decisions. Results show clear sectoral asymmetry. Domestic-oriented FMCG remained stable, whereas export-intensive sectors—especially Metals and Chemicals—experienced heightened volatility and negative abnormal returns. IT and Pharma demonstrated resilience and steady CAR recovery after the shock. Behavioural analysis revealed that younger investors had significantly higher awareness (χ² = 18.1, p < .001), and perceived volatility strongly shaped portfolio decisions (χ² = 19.0, p < .001). Investor confidence was tied to their understanding of tariff impacts (χ² = 13.1, p = .001), supporting behavioural finance theory that informed investors make more stable decisions (Baker et al., 2016). This integrated evidence shows that tariff shocks simultaneously affect market fundamentals and investor psychology, reinforcing the importance of financial literacy, diversification, and transparent policy communication during geopolitical uncertainty.
Keywords	Tariff shock, Investor behaviour, Volatility, Nifty indices, Abnormal returns, India–U.S. trade, Event study
Field	Business Administration
Published In	Volume 8, Issue 1, January-February 2026
Published On	2026-02-19
DOI	https://doi.org/10.36948/ijfmr.2026.v08i01.69246

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Sectoral Vulnerability and Investor Behaviour During the 2025 U.S.–India Tariff Shock: Evidence from Nifty Indices and Primary Market Perceptions

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