The Indian stock market extended its losses for the second consecutive month in August, with the Nifty 50 falling 1.4% and the Sensex losing 1.7%, as fears mounted that higher tariffs could impact the economy after the US doubled duties on Indian goods to as high as 50%, the second highest among America’s trading partners.
The move has also dented overseas investor sentiment. Foreign investors, already cautious amid weak earnings visibility and lofty valuations, have accelerated their selling spree, ₹38,590 crore from Indian exchanges”>pulling out another ₹38,590 crore from Indian exchanges so far in August.
In the week gone by, the Nifty 50 lost 1.78% to 24, 426 and the Sensex 1.84% to 79,806, marking their worst weekly drop in the last five months. The broader markets registered even steeper cuts, with the Nifty Midcap 100 and Nifty Smallcap 100 losing 3.30% and 4%, respectively, for the week.
President Trump, who has often labeled India a “tariff king,” justified the latest move by citing the US trade deficit with India and New Delhi’s continued imports of Russian oil and defense equipment. The US, India’s largest export market worth $86.5 billion annually, now subjects about two-thirds of shipments to a 50% tariff.
ICRIER estimates nearly 70% of exports, valued at $60.85 billion, are at risk, while SBI Research warns the impact could erode India’s long-term trade advantage, with the $45 billion worth of major exports—especially textiles and gems & jewellry—facing pressure.
SBI cautioned India’s surplus with the US could vanish, while CLSA said halting Russian oil purchases may push crude to $100 per barrel. Trade talks between India and the US have stalled after five rounds, as Washington pushed for access to genetically modified (GM) crops like corn and soybeans—a demand New Delhi has refused to protect sensitive sectors.
Meanwhile, Prime Minister Narendra Modi on Monday reaffirmed that the interests of farmers and small-scale industries remain paramount for the central government. He emphasized that even if pressure on the government increases, it will withstand it.
The government, meanwhile, is taking steps to offset the impact by identifying new countries to diversify exports and is reportedly preparing a supportive package, similar to the Covid-19 relief measures, to support labor-intensive sectors.
Analysts caution weakness may extend if crucial support breaks
Rupak De, Senior Technical Analyst at LKP Securities, said the Indian equity market recorded another day of losses, extending the corrective leg. “On the daily chart, the index has fallen further below the 100 EMA, confirming a deeper bearish trend.
The RSI is in a bearish crossover, indicating sustained weakness. In the short term, the trend may remain weak, potentially dragging Nifty towards the 200 DMA placed at 24,071. On the lower end, support is placed at 24,400/24,150, while on the higher end, resistance is seen at 24,650. A ‘sell on rise’ strategy remains preferable as long as the index stays below 24,850,” he added.
Amol Athawale, VP – Technical Research at Kotak Securities, echoed the cautious outlook, noting that while the market’s short-term outlook remains weak, a fresh sell-off is possible only if the level of 24,330/79,700 is breached.
“On the other hand, above 24,550/80,500, the pullback rally could continue up to the 20-day SMA at 24,700/81,000 and 24,800/81,300. On the downside, if the market falls below 24,330/79,700, it could slip to the 200-day SMA around 24,070/78,900, with further downside potentially dragging it to 23,900/78,400,” he said.
Factors likely to shape market direction next week
Siddhartha Khemka, Head of Research – Wealth Management, Motilal Oswal Financial Services, said the market is likely to watch out for any positive developments during PM Modi’s much-anticipated visit to China over the weekend for the SCO summit – his first in seven years. The four-day trip, which also includes a visit to Japan, comes while India seeks to strengthen global trade ties.
On the macro front, he noted that India’s industrial production (IIP) picked up pace in July, rising to a four-month high of 3.5%, driven largely by the manufacturing sector. Meanwhile, the US Q2 GDP growth was revised upwards to 3.3% (from the 3.0% in July), supported by low imports and strong consumer spending.
“Overall, we expect the market to trade in a range-bound manner, tracking developments in the India-US trade negotiations and India’s strategic meetings with global leaders. Additionally, markets on Monday would react to India’s Q2 GDP and US retail inflation data to be released after-market hours on Friday,” he added.
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