A wave of anxiety over potential increases in U.S. tariffs on Indian exports has led to a significant sell-off on Dalal Street. On Thursday, the Sensex plummeted by 780 points, nearly 1%, while the Nifty fell by 264 points. This downturn was exacerbated by strong foreign fund selling and delays in finalizing a U.S.-India trade agreement, leaving investors wary and prompting a cautious market outlook.
Market Reaction to U.S. Tariff Concerns
The Indian stock market opened on a weak note, with the Sensex down approximately 200 points. Throughout the trading session, the index continued to decline, ultimately closing at 84,181 points, marking a loss of 780 points or 0.9% for the day. This decline represents the fourth consecutive session of losses for the Sensex, which has now dropped a total of 1,581 points or 1.8% during this period. The cumulative effect of these losses has resulted in a staggering reduction of Rs 9 lakh crore in investor wealth, bringing India’s total market capitalization down to Rs 473 lakh crore, according to data from the Bombay Stock Exchange (BSE).
Impact of U.S. Legislation on Indian Exports
The market’s decline was largely influenced by a bill signed by U.S. President Donald Trump, which could impose a staggering 500% tariff on Indian goods if the country continues to purchase oil from Russia. This potential tariff increase adds to the existing pressure from already high U.S. tariffs, raising concerns about the future of India’s export industry. Market analysts believe that such developments could significantly impact India’s trade dynamics, further straining investor confidence.
Vinod Nair from Geojit Investments noted that the Indian market’s losing streak reflects a cautious sentiment among investors, overshadowing any optimism regarding earnings growth. The negative outlook has also dampened enthusiasm surrounding projected robust growth in India’s GDP for FY26, as concerns over U.S. tariffs and foreign fund outflows take precedence.
Foreign Fund Selling and Domestic Market Dynamics
During Thursday’s trading session, foreign investors were notably aggressive sellers, with net selling reaching Rs 3,367 crore by the end of the day. In contrast, domestic funds showed resilience, emerging as net buyers with purchases totaling Rs 3,701 crore. This divergence highlights the contrasting strategies of foreign and domestic investors in response to the current market climate.
Among the stocks listed on the Sensex, Reliance Industries, L&T, and TCS were the primary contributors to the day’s decline. Conversely, gains in ICICI Bank, Eternal, Bajaj Finance, and Bharat Electronics provided some support, albeit insufficient to offset the overall market downturn.
Future Market Outlook
Looking ahead, market analysts predict that the Indian stock market will likely remain cautious and trade within a limited range. Factors influencing this outlook include upcoming Q3 earnings reports and ongoing developments related to U.S. tariffs on Indian exports. Siddhartha Khemka from Motilal Oswal Financial Services emphasized that geopolitical tensions and weak global market cues could further dampen investor sentiment, keeping the leading indices subdued in the near term. As the situation evolves, investors will be closely monitoring both domestic and international developments that could impact market performance.
Digihunt is not a financial advisor and this is not investment advice.