Trump's Rice Tariff Threat Sparks Market Selloff; Sensex Crashes Below 85,000
Indian equity markets opened sharply lower on Tuesday, extending losses from the previous session as a fresh trade threat from the United States rattled investor sentiment. The BSE Sensex plummeted below the 85,000 mark, hitting a two-week low, while the Nifty 50 index shed over 200 points in early trade.
The sell-off was triggered by comments from U.S. President Donald Trump, who warned of imposing new tariffs, specifically targeting agricultural imports like rice from India. During a White House meeting on Monday, Trump responded to concerns from a Louisiana rice producer about foreign competition, stating, "They shouldn't be dumping... I heard that from others. You can't do that". When informed that Indian firms own two of the largest rice brands in the U.S. retail market, Trump declared, "All right, and we'll take care of it... Tariffs, again, solves the problem in two minutes".
Key Market Metrics at a Glance (as of Early Trade, Dec 9)
| Index / Metric | Level / Figure | Change | Note |
| BSE Sensex | 84,704 points | -398 points / -0.5% | Hit a two-week low |
| Nifty 50 | Below 26,000 | -0.5% | Opened around 25,899 |
| Top Loser | Asian Paints | -3.5% | Led declines among major stocks |
| Sector Trend | All sectors in red | Tech, metals hardest hit | Broader small & mid-caps also fell |
The Underlying Strain: Foreign Investors Exit, Domestic Money Steps Up
The tariff threat exacerbates an existing major headache for Indian markets: sustained selling by Foreign Institutional Investors (FIIs). So far in 2025, FIIs have pulled out a staggering ₹1.4 to ₹1.5 lakh crore from Indian equities, marking a record year of outflows. Analysts attribute this to India's relatively high valuations compared to other emerging markets, muted corporate earnings growth, and global geopolitical uncertainties.
However, a powerful counterforce has emerged. Domestic Institutional Investors (DIIs), fueled by relentless inflows into mutual funds via Systematic Investment Plans (SIPs), have been providing a robust cushion. In 2025 alone, DIIs have pumped a record ₹6 trillion into the market, decisively offsetting foreign outflows. This has led to a historic shift where DII ownership in NSE-listed companies has surged to an all-time high of 18.26%, while FII ownership has shrunk to a 13-year low of 16.71%.
Expert Insight and What to Watch Next
Market experts view the current dynamic as a clash of narratives. "FIIs are being highly selective and valuation-conscious, while domestic investors are making a powerful bet on India's long-term growth story," notes an analysis. The immediate market direction will hinge on developments in the U.S.-India trade negotiations, with a U.S. team expected to visit India soon for talks.
For now, the record flow of domestic capital is ensuring market resilience. As one fund manager put it, monthly domestic inflows demonstrate a deepening local investor base, and "if tariff concerns abate, global investors could eventually play catch-up". Investors are advised to monitor these macro developments while the market digests the latest trade shock.
