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(Bloomberg) -- Indian stock futures slid and the rupee dropped offshore on Wednesday after US President Donald Trump said he would impose a tariff rate of 25% along with an additional penalty on imports from the world’s fastest growing major economy.

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While the announcement came after Indian markets had closed, NSE Nifty 50 future contracts traded at GIFT City fell as much as 0.5%, erasing earlier gains of 0.4%. The dollar/rupee one-month forward was up 0.9% to 88, pushing the pair to its highest since February, according to data compiled by Bloomberg. The iShares MSCI India stocks ETF, which trades in the US, was down over 1%.

Trump said he would impose the tariff starting on Aug. 1. It risks accelerating outflows from Indian equities by foreign funds, who have already withdrawn over $2 billion this month.

The additional penalty over India’s energy purchases could lead investors to sell shares of Reliance Industries Ltd. and several state-owned refiners, who have been among the biggest buyers of Russia’s oil since the start of the Russian-Ukraine War.

“This tariff announcement will lead to more pressure on the markets as the foreign investors will prefer to sit on the sidelines waiting for a trade deal between India and US,” said Abhay Agarwal, founder at Piper Serica Advisors. “Only a very strong dose of good news will reverse flows.”

The US was India’s biggest trading partner in 2024 with a total trade of $132 billion. The new tariffs raise uncertainty for global investors as they will weigh on investment opportunities in the backdrop of shifting supply chains.

Earlier, the rupee fell to a five-month low in onshore trading on Trump’s threat that India may face 20%-25% tariffs on imports to US.