The Indian stock market suffered significant losses in morning trade on Thursday, August 28, after a new round of US tariffs came into effect on Wednesday, raising overall duties to 50 per cent on Indian goods exported to the US.
The benchmark Sensex crashed nearly 700 points, or 1 per cent, to hit an intraday low of 80,093.52. The NSE counterpart Nifty 50 also fell about 1 per cent to hit its intraday low of 24,507.20.
The BSE Midcap and Smallcap indices crashed by over 1 per cent each during the session.
The overall market capitalisation of BSE-listed firms dropped to nearly ₹445 lakh crore from ₹449 lakh crore in the previous session, making investors poorer by about ₹4 lakh crore.
Around 1:20 PM, the Sensex was 540 points, or 0.67 per cent, down at 80,247, while the Nifty 50 was 155 points, or 0.63 per cent, lower at 24,557.
Why is the Indian stock market falling?
Trump’s tariffs are the biggest factor behind the market sell-off. This has further worsened the already sombre market sentiment, which is also weighed down by foreign capital outflows, weak earnings, and stretched valuations. Let’s take a look at five key factors driving the market downtrend:
1. The Trump tariff impact
In late July, United States President Donald Trump had announced a 25 per cent tariff on Indian goods starting August 1. Subsequently, in early August he announced an additional 25 per cent tariff on Indian imports, to be effective from August 27, citing the country’s alleged direct and indirect import of oil from the Russian Federation.
There were expectations that India would avoid secondary tariffs and reach an amicable deal with the US before the August 27 deadline. With that possibility gone and tariffs now in effect, market sentiment has taken a fresh hit. Both countries are expected to seek common ground on tariffs, but the market will be watching for concrete signs of progress.
Meanwhile, US Treasury Secretary Scott Bessent said on Wednesday that he believes India and the US “will come together” to find a solution to the current tariff issue.
2. Massive FII outflow
Foreign institutional investors (FIIs) have been on a relentless selling spree in the Indian stock market since July amid largely stable dollar and tariff-related uncertainties, weighing on market sentiment.
FIIs have sold Indian stocks worth ₹34,733 crore in the cash segment in August so far. In July, they took away ₹47,667 crore from the cash segment.
According to a recent Nomura report, Indian stocks have become the biggest underweight allocation for emerging market (EM) investors.
In July, investors reallocated capital from India to markets like Taiwan, Hong Kong/China, and South Korea.
3. Stretched valuations
Experts believe that the market’s stretched valuations amid weak earnings have been a major factor keeping it range-bound since June this year.
There is also skepticism about an earnings revival in the second half of the year due to prevailing tariff-related concerns. The earnings-valuation mismatch remains the primary reason behind the exodus of FIIs from the Indian market.
“The real challenge before the market is the high valuations and the tepid earnings growth. The strong pillar of support to the market is the aggressive buying by DIIs flush with funds. Any selling by FIIs will be easily neutralised by the aggressive buying by DIIs,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
“Investors can consider moving money from over-valued smallcaps to the safety of fairly valued largecaps with focus on domestic consumption,” said Vijayakumar.
4. Trump’s tariff may impact the economy, delay earnings revival
There are concerns that Trump’s tariffs may delay the anticipated earnings revival in India, which is expected in the second half of the year.
While Trump’s tariffs’ direct impact on the Indian economy may be moderate and manageable, his trade war with other major economies could trigger a global economic slowdown, which in turn could have a ripple effect on India.
Trump’s aggression on tariffs is not subsiding. On Monday, he hinted at imposing a potential digital tax, saying that the US will increase tariffs and impose export restrictions on countries that tax or regulate US tech firms.
Experts say risk-off sentiment due to global economic weakness can indirectly impact Indian equities.
5. Technical factor: Nifty falls below 24,600
According to Nirmal Bang Retail Research, Nifty has immediate support at 24,640. If it closes below that, further downside can be expected towards the 24,570-24,500 mark. On the flip side, 24,800-24,900 will act as strong resistance levels.
Reliance Securities pointed out that the Nifty 50 slipped below its 20-day simple moving average of 24,739 in the previous session, indicating near-term weakness. The RSI is at 47, hovering near the neutral zone but trending slightly downward, signalling fading bullish momentum.
“Immediate support is seen at 24,416, and if this breaks, the index may retest lower levels around 24,200; on the upside, resistance is capped near 24,900–25,000, where sellers are likely to emerge,” said Reliance Securities.
Amruta Shinde, Technical & Derivative Analyst at Choice Equity Broking, said a decisive move above 24,850 could pave the way for an upside toward 25,000 and 25,150. On the downside, immediate support is placed at 24,670, followed by 24,500, which may attract fresh long positions.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
