Indian equities fell sharply on Tuesday as investors reacted to the United States’ plan to impose steep tariffs on Indian exports. The benchmark Sensex crashed nearly 700 points, while the Nifty 50 slipped close to the 24,750 mark, wiping out over ₹5 lakh crore in investor wealth.
The selloff came a day ahead of the August 27 deadline for the Trump administration’s additional tariffs, which will raise overall duties on Indian goods to 50 per cent.
Analysts said worries over escalating trade tensions, coupled with foreign investor outflows and weak global cues, triggered broad-based selling across segments.
The Sensex opened at 81,377.39 against its previous close of 81,635.91 and dropped almost 700 points, or 1 per cent, to an intraday low of 80,947.26. The Nifty 50 opened at 24,899.50 compared to its previous close of 24,967.75 and fell nearly 1 per cent to its day’s low of 24,755.60.
The BSE Midcap and Smallcap indices underperformed, falling as much as 1.5 per cent during the session. The total market capitalisation of BSE-listed companies slipped to around ₹450 lakh crore from ₹455 lakh crore in the previous trade, leaving investors poorer by about ₹5 lakh crore.
Why the Indian market is falling
Analysts cited five key reasons behind Tuesday’s decline.
The first is anxiety over Trump’s tariff move. Contrary to expectations of a possible reprieve, the US administration issued a draft notice on Monday detailing a 50 per cent tariff on Indian products.
Officials said the measure is designed to pressure Moscow by discouraging India’s purchase of Russian oil. Trump has also threatened more tariffs on countries imposing digital taxes on US tech firms, raising fears of a prolonged global trade conflict.
Second, elevated valuations remain a concern. Experts noted a mismatch between stock prices and earnings growth. “Currently, we are at 19 times the FY27 earnings, which is on the expensive side,” said Shrikant Chouhan, head of equity research at Kotak Securities.
He added that while earnings may pick up in Q3FY26 due to seasonal factors and a strong monsoon, markets often discount such developments well in advance.
The third factor is persistent selling by foreign institutional investors. FIIs have sold Indian equities worth ₹28,217 crore so far in August, after unloading stocks worth ₹47,667 crore in July.
“This indicates their ongoing investment in new themes and businesses, while they are reducing exposure to slower-growth sectors,” said Vipul Bhowar, Senior Director and Head of Equities at Waterfield Advisors.
Fourth, weak global cues weighed on sentiment. Asian peers such as Japan’s Nikkei and South Korea’s Kospi fell about 1 per cent each, mirroring declines in US indices.
Markets were unsettled after Trump abruptly dismissed Federal Reserve Governor Lisa Cook over alleged mortgage loan misconduct. The move, alongside the President’s criticism of Fed Chair Jerome Powell, raised concerns about the independence of the US central bank.
Finally, technical factors added pressure. Experts said the Nifty faces strong resistance at 25,000, leading to profit-taking near this level.
Chouhan noted that 25,000 will be the immediate breakout point, while 24,900-24,850 will act as support. Below 24,850, the index could fall to 24,750-24,670. Anand James, Chief Market Strategist at Geojit Investments, added that a close below 24,740 would pave the way for further downside plays.
With tariff deadlines approaching and global risks looming, traders expect volatility to remain high in the near term.
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