Plummeting Stock Prices: Sensex Falls to 80,630; Nifty Hits 24,600
Indian Equities Face Volatility Amid Trade Tensions and FPI Selling
The Indian stock market opened with caution on Tuesday, August 5, 2025, as the Sensex drifted down to around 80,600 – 80,630 and the Nifty 50 fell beneath 24,650, trading close to 24,600. This cautious sentiment has been prevalent in the market for several weeks, with the Nifty50 and Sensex hitting three-month lows in early August.
The current outlook for Indian equities amid growing global trade tensions and potential US tariffs on Indian goods is cautious to negative in the short term. Significant selling pressure has been observed recently, and uncertainty around tariff impacts is weighing on the market.
One of the major factors contributing to the negative opening on Dalal Street is the trade threat between the US and India. US President Donald Trump announced potentially substantial tariffs on Indian goods, tied to India's ongoing import of Russian oil. This threat particularly affects sectors such as auto parts, capital goods, building materials, electronics manufacturing services (EMS), and textiles, which may lose competitiveness compared to rivals in countries with lower or no tariffs like Bangladesh or Vietnam.
However, despite the short-term pressures, India’s equity market has shown resilience over the past years, outperforming many peers. This resilience is supported by strong domestic consumption, a growing investor base within India, easing inflation, and an accommodative monetary policy environment with recent RBI rate cuts. These factors suggest Indian equities maintain attractiveness over the longer term, contingent on resolution or easing of trade-related challenges.
In the short term, Indian equities face volatility and downside risks due to tariff-induced uncertainty and FPI selling. Key events to watch include tariff negotiations scheduled for August 25, 2025, between India and the US. Short-term market direction is expected to show volatility, with key technical pivot points and time windows for market moves around August 8 and 11. If negotiations fail, the steep tariffs could intensify selling pressure, especially in export-oriented sectors.
In company-specific news, HDFC Bank, ICICI Bank, and Reliance Industries slipped nearly 1% on Tuesday, while Butterfly Gandhimathi Appliances rallied around 8% after doubling its quarterly profit. Delhivery also climbed over 7% after reporting improved margins in its quarterly numbers. Triveni Turbine tumbled almost 7% following a weak earnings report. Marico dipped close to 2% despite posting a modest increase in profit, and Godfrey Phillips surged nearly 10% after a strong 56% year-on-year profit rise and a 2:1 bonus share announcement. IndusInd Bank jumped nearly 5% after announcing Rajiv Anand as its new CEO.
The strength of the US dollar and broader trade-related uncertainty keep Indian equities under pressure. Emerging market volatility and the risk of reduced foreign inflows add to the cautious tone. Overseas funds have been showing caution for several sessions despite healthy inflows last month. Global cues remain mixed, with Asian peers showing modest gains on hopes of an eventual US Federal Reserve rate cut later this year.
Foreign investor sentiment is affected by the trade threat, with investors waiting for clarity on US policy before taking fresh positions. Despite this, domestic institutional investors (DIIs) have been active buyers supporting the market and preventing a sharper crash. The near-term stock market outlook remains cautious, but the strength of domestic investor participation and strong underlying economic fundamentals provide a cushion and longer-term investment appeal.
[1] Indian Market Outlook Amid US-India Trade Tensions [2] Indian Stocks Slip as Trade Tensions Escalate [3] US Tariffs on Indian Goods: Impact and Outlook [4] India's Long-term Equity Market Resilience [5] Impact of US Tariffs on Indian Exports
- Investors should exercise caution when considering investing in the Indian stock market due to the negativity surrounding trade tensions and potential US tariffs on Indian goods, which could cause short-term volatility and downside risks.
- Given the current circumstances of rising trade tensions, increasing FPI selling, and the uncertainty around tariff impacts, it's essential for savvy investors to closely monitor the stock-market for the potential fluctuations and focus on long-term strategies.
