Mid- and Small-Caps Drop Sharply on Trump’s Reciprocal Tariffs and Broad Market Sell-Off

Indices Drop 2% on Global Sell-Off; RBI Flags Tariff Risks, Pharma and Finance Stocks Slip

Indian equity markets witnessed a sharp sell-off in mid- and small-cap segments on April 9, as escalating global trade tensions sparked by the United States’ implementation of reciprocal tariffs triggered broad-based risk aversion. The move comes amid fears of a deepening global trade war, following retaliatory action by China and potential tariff threats against Indian pharmaceuticals and other exports.

The Nifty Smallcap index dropped 1.87 percent, while the Nifty Midcap index lost 1.8 percent, reversing gains from the previous session. The declines were triggered by across-the-board liquidation as investors fled riskier assets, with market sentiment deteriorating rapidly due to macroeconomic headwinds and geopolitical uncertainty.

• Nifty Smallcap plunges 1.87%, Nifty Midcap falls 1.8%

• US implements steep tariffs, including 104% on Chinese goods

• China retaliates; global markets reel from fresh trade war fears

• Pharma and finance stocks among the biggest casualties

• RBI warns US tariffs may reduce FY26 GDP by up to 40 bps

US Tariff Shockwaves Hit Indian Equities

The latest correction in Indian equity markets followed the announcement by former US President Donald Trump’s administration, which enforced a sweeping set of reciprocal tariffs on imports from 60 countries, including India. Among the most notable actions was a 104 percent duty on Chinese goods, a move widely seen as reviving the protectionist stance from Trump’s earlier tenure.

The announcement rattled global markets, prompting a wave of retaliatory tariff declarations, including one from China, further aggravating fears of a global economic slowdown. Indian equities bore the brunt of the fallout, with small- and mid-cap stocks hit hardest due to their higher sensitivity to global trade and macroeconomic volatility.

• Trump imposes sweeping reciprocal tariffs across 60 nations

• Global markets tumble amid trade war fears and retaliatory threats

• India’s export-focused sectors face increased headwinds

Sector-Wide Sell-Off Drags Broader Market

The carnage was broad-based, with heavy selling pressure across sectors including finance, consumer goods, infrastructure, and healthcare. Leading small-cap losers included BLS International Services, Amber Enterprises, IIFL Finance, Piramal Pharma, and Anant Raj, each falling by as much as 5 percent.

In the mid-cap space, Muthoot Finance, Biocon, The Phoenix Mills, Coforge, and Glenmark Pharmaceuticals saw declines of up to 10 percent, reflecting sector-specific concerns on top of the macro-driven sell-off.

• IIFL Finance, Piramal Pharma among top small-cap losers

• Muthoot Finance, Glenmark, Coforge lead mid-cap decline

• Sell-off extends across financial, healthcare, and realty sectors

RBI Flags Tariff Risk to India’s Growth Outlook

Adding to the downward pressure, the Reserve Bank of India raised concerns during its first bi-monthly monetary policy statement for FY26. RBI Governor Sanjay Malhotra explicitly cited the newly imposed 26 percent US duty on Indian goods as a risk factor, warning that it could lead to a 20–40 basis point cut in India’s GDP growth for FY26, bringing the forecast down to 6.1 percent from the earlier 6.7 percent.

This stark warning from the central bank highlighted the real economic implications of rising trade tensions and added to the bearish sentiment dominating the equity markets.

• RBI sees up to 40 bps downside risk to GDP due to US tariffs

• Growth outlook for FY26 revised down to 6.1%

• Malhotra cautions on trade friction-driven inflationary spillovers

Gold Loan and Pharma Stocks Under Regulatory and Tariff Pressure

Further pressure came from two key regulatory and geopolitical triggers. First, the RBI’s announcement that it would soon release comprehensive guidelines on gold loans sent Muthoot Finance and IIFL Finance sharply lower, as markets priced in potential tightening of lending norms.

Second, Trump’s indication that the next round of tariffs could target pharmaceutical imports, including Indian pharma products, led to a sharp decline in pharma stocks. Companies like Biocon, Glenmark Pharmaceuticals, and Piramal Pharma were among the worst hit.

• Gold loan financiers drop on regulatory overhang

• Pharma stocks slide on looming US tariff threat

• Muthoot and IIFL Finance lose traction post-RBI announcement

Investor Sentiment Remains Fragile Amid Uncertain Global Landscape

The market correction underscores the heightened fragility of investor sentiment amid a confluence of adverse factors—from protectionist US trade policy to regulatory uncertainties, and from macroeconomic softness to geopolitical risk. The sharp correction in broader indices reflects the rising risk premium investors are attaching to emerging market equities, particularly those exposed to global trade cycles and policy unpredictability.

With additional regulatory announcements expected from both domestic and global authorities, and no clear de-escalation of tariff tensions on the horizon, volatility in mid- and small-cap segments is likely to remain elevated in the near term.