IJLTEMAS International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS) IJLTEMAS 2278-2540 IJLTEMAS 176 10.51583/IJLTEMAS.2026.150700175 Education Trade Policy Shocks and the Indian Equity Market: An Empirical Analysis of U.S. Tariff Changes and Sectoral Stock Returns Avinash Holihosur Prof. JSS, SMI UG & PG Studies, Dharwad India Melita Simoes Dr. SMSR, KLE Technological University, Hubli India Laxman R Yaligar Prof. JSS, SMI UG & PG Studies, Dharwad India Hema Holihosur Mrs. Shakti Institute of Financial Markets, Dharwad India A M Kadakol Dr. Karnatak University, Dharwad India 15 7 2390 2396 10 08 2026 15 08 2026 27 08 2026 Tariff policy Trade policy Indian equity market GARCH FPI flows. Abstract

This study aims to understand how major US tariff-policy announcements have influenced the prices of Indian equities. The study further explores conditional volatility and financial transmission channels from January 2018 to June 2026. This study employs a combined event-study framework. Generalized Autoregressive Conditional Heteroskedasticity (GARCH) volatility modelling along with a five-variable Structural Vector Autoregression (SVAR) was also used. The study was carried out for a 251 trading day estimation window and three event windows around six policy announcements. The reported results show a statistically significant negative response of the NIFTY 50, with a cumulative average abnormal return (CAAR) of −1.42% over the [−1,+1] window. Sectoral responses are heterogeneous: NIFTY Metal (−3.65%), and NIFTY IT (−2.84%) show larger negative responses, whereas NIFTY FMCG (−0.22%) is statistically insignificant. GARCH estimates indicate positive event-related variance shifts for NIFTY 50, IT and Metal, but not FMCG. Under the specified Cholesky identification, the 10-day forecast-error variance of NIFTY IT is associated with FPI-flow and USD/INR shocks accounting for 24.3% and 18.7%, respectively, while TPU shocks account for 29.1% of NIFTY Metal variance. The results showcase heterogeneous short-run responses across the selected sectors while the transmission estimates highlight conditionality on the specified identification structure. These findings indicate that U.S. tariff announcements are associated with heterogeneous short-run spillovers into Indian equities, with financial channels complementing direct trade exposure.

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