Markets slide in August: US tariffs, Russia-Ukraine war hit equity; GST reforms offer cushion

Indian equity markets fell sharply after the US President raised tariffs on Indian exports to 50 per cent in August, creating headwinds for the country’s manufacturing sector and potential economic growth.

Further declines were seen due to the escalating Russia-Ukraine conflict. The fall was partially offset by expected benefits from the Prime Minister’s GST reforms, which could boost household spending, control inflation, and allow room for RBI rate cuts, according to ICRA Analytics, cited by Economic Times.


On the other hand, bond yields rose after the Reserve Bank of India kept rates unchanged in its August 2025 policy meeting, taking a cautious stance to assess the impact of previous rate cuts, contrary to expectations of an accommodative approach.

ICRA Analytics noted extended market weakness despite the Prime Minister’s comprehensive GST modifications, raising concerns over fiscal health and debt levels. However, the decline was cushioned by an upgrade of India’s sovereign credit rating from ‘BBB-’ to ‘BBB’ by a leading international rating agency.

Mutual fund performance

• Equity funds: Positive category-average returns were recorded over 3-year, 5-year, and 10-year periods, but one-year returns fell across categories, averaging a decline of 4.84 per cent. Over five years, equity funds delivered 22.14 per cent average returns, while ten-year returns stood at 14.37 per cent. Small-cap funds led the pack with 5-year average returns of 28.27 per cent. Sectoral/thematic funds posted a one-year negative return of 3.63 per cent.
• Debt funds: Positive returns were seen across all timeframes. One-year returns averaged 6.99 per cent, three-year returns 7.09 per cent, five-year 5.95 per cent, and ten-year 6.68 per cent. Credit risk funds posted the highest returns across 6-month, 1-year, 3-year, and 5-year periods, with 6-month annualised returns at 11.86 per cent. Liquid funds led one-month returns at 5.49 per cent, while ten-year constant duration Gilt funds delivered maximum average returns of 7.86 per cent.
• Passive and hybrid funds: Passive funds, including ETFs and index funds, generated the highest returns last year at 15.19 per cent. Hybrid funds returned 2.75 per cent, whereas solution-oriented funds declined by 1.09 per cent on average.