The 1% slide in both the Sensex (-849 pts) and Nifty 50 (-256 pts) was triggered by a combination of external shocks and domestic headwinds:
- US tariffs jump to 50% on Indian exports
A late-night draft notice from Washington confirmed an additional 25% duty—effective tomorrow—on goods linked to India’s purchases of discounted Russian oil. The sudden escalation raises the spectre of a broader trade war and directly hits export-oriented sectors, souring risk appetite. - Relentless FII selling
Foreign portfolio investors have already dumped about ₹28,000 crore of equities in August after off-loading ₹47,000 crore in July. The tariff shock only intensified outflows, amplifying intraday volatility. - Rich valuations meeting earnings reality
At ~19× projected FY27 EPS, the Nifty is pricing in optimistic growth. With June-quarter results showing only mid-single-digit profit expansion, expensive multiples left little margin for bad news, prompting profit-taking across large-caps and an even steeper 1.6–2% fall in mid- and small-cap indices. - Global risk-off mood
a) Asian peers dropped after President Trump abruptly fired Fed governor Lisa Cook, fuelling worries about Federal Reserve independence and policy stability.
b) US index futures and European markets were already in the red on chips-export curbs chatter, feeding contagion into Dalal Street. - Sector-specific pain points
- Tariff-sensitive metal and pharma stocks slid 1.5–3.6%.
- Realty and PSU banks corrected 1.8–2.2% on fears of higher funding costs and weaker demand.
- FMCG—relatively insulated from tariffs—was the lone gainer, up 0.9% led by HUL and ITC.
- Rupee weakness and holiday-thin liquidity
The INR flirted with a record 84/$ amid risk-off trades, increasing imported-inflation worries. Tomorrow’s Ganesh Chaturthi market holiday shortened settlement cycles, encouraging traders to square positions.
What to watch next
- Whether New Delhi can negotiate a tariff reprieve during the now-uncertain US trade delegation visit.
- US PCE inflation data and Powell’s Jackson Hole follow-up speech later this week—any dovish hint could stabilise global yields.
- Domestic flows: DIIs absorbed part of today’s sell-off; their stance will be crucial if FII selling persists.
- Technical markers: Nifty’s 24,600 (50-DMA) and Sensex’s 80,000 round figure act as near-term supports, while India VIX’s 4% jump signals elevated swing risk.
Until clarity emerges on trade policy and earnings momentum improves, expect higher volatility with a bias to consolidate near long-term averages rather than a one-way slide.
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