The Wall Street Slump: How can Indian investors protect their US stocks portfolio?

The US stock markets are facing a significant selloff, with the S&P 500 falling from a record high, touched three weeks ago, into the 10% correction territory.

Investors are worried that the escalating tariff war being waged by the United States could flare up inflation and tip the economy into recession, sending US stock indices lower. Apart from trade war fears, a major factor behind the crash on Wall Street, stretched valuations are also keeping risk-on sentiments in check.

According to Reuters data, the S&P 500 closed 10.1% below its February 19 record closing high on March 13, while Nasdaq confirmed it is in a correction by closing 10.4% down from record on March 6.

The US market fall has been driven by multiple factors like trade policy uncertainties and fears of a potential recession, said Trivesh D., COO, Tradejini. “However, the primary concern has been the ongoing back-and-forth tariff announcements, which have unsettled investors and further dampened market sentiment. Concerns about a possible economic slowdown—or even a recession—have added to the turmoil, with the technology sector being the most affected. Furthermore, with US President Trump firm on imposing reciprocal tariffs starting in April, volatility is expected to remain elevated despite near-term risks,” he added.

In the latest instance of US President Donald Trump‘s ongoing trade disputes, the European Union retaliated against the blanket tariffs on steel and aluminum by imposing a 50% tax on American whiskey exports. In response, Trump posted on Truth Social, warning that he might impose a 200% tariff on European wines and spirits.

Viram Shah, Founder & CEO of Vested Finance, also warned investors that they should brace for continued fluctuations in the US markets over the next year or two. However, he added that we are not officially in a bear market, and the overall sentiment remains cautious rather than outright negative.

Indian investors in a tough spot

The ongoing US stock market fall has posed challenges for Indian investors who have taken exposure to the stocks in the world’s largest economy to evade the bearish mood back home.

Analysts believe that while volatility may persist for some time amid the trade war worries and recession fears, being patient and investing in fundamentally sound companies could be the way to navigate the bloodbath on Wall Street.

“For Indian investors, patience is key when investing in US markets. Holding strong companies with solid fundamentals and a long-term perspective remains a sound strategy. Market dips can present buying opportunities for high-quality companies, and avoiding panic selling is crucial. US markets offer access to global companies, making them an attractive diversification option,” Shah said.

Beyond the US, he believes China and Europe present interesting opportunities, particularly in clean energy and luxury goods.

“The Chinese market, currently at low valuations, has shown signs of a potential comeback through US-listed stocks, ADRs, and ETFs. Similarly, corporate reforms in Japan and manufacturing growth in Southeast Asia make these regions compelling investment destinations. While Indian markets remain the core of an investor’s portfolio, diversification beyond domestic markets can open doors to new opportunities, especially in sectors poised for global growth,” Shah added.

What could spark a rebound in the US market?

Fed pivot towards rate cuts, strong corporate earnings, and a reduction in geopolitical tensions—especially concerning the Russia-Ukraine war— are among factors that could help ease the selloff in US stock markets, according to experts.

“Institutional investors are closely monitoring economic data, particularly inflation and job reports, which will play a key role in shaping market movements,” Shah said.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.