Indian equities faced headwinds, marking their second consecutive month of losses. The Nifty index dropped 1.38%, resulting in its weakest two-month performance since early 2023. This decline can be attributed to a combination of factors, including U.S. tariff shocks, significant foreign fund outflows, and widespread profit-taking across various sectors.

U.S. Tariff Impact

A major blow to the Indian market came when the United States doubled its duties to 50% on Indian goods. This move, reportedly in response to India's oil purchases from Russia, has particularly affected export-oriented industries, adding pressure to an already strained market.

Foreign Investment Exodus

The market sentiment was further dampened by substantial foreign portfolio investor (FPI) withdrawals. FPIs pulled out approximately Rs 527.00 billion from Indian equities, signaling a cautious approach towards emerging markets amidst global economic uncertainties.

Economic Resilience Amid Market Turbulence

Despite the market downturn, India's economy demonstrated remarkable resilience. The GDP grew by 7.80% year-on-year in the June quarter, surpassing the consensus estimate of 6.70%. This growth was primarily driven by robust performance in the services sector, which expanded by 9.30%, and a significant 9.70% jump in government spending.

Upcoming GST Council Meeting

Market participants are closely watching the upcoming Goods and Services Tax (GST) Council meeting. The meeting is expected to discuss tax regime rationalization, with speculation around a potential three-tier structure that could benefit consumption and auto sectors.

Diplomatic Developments

In a significant diplomatic move, Prime Minister Narendra Modi met Chinese President Xi Jinping in Beijing, marking his first visit to China in seven years. This meeting has sparked interest in potential geopolitical and economic implications for both nations.

Market Outlook

Analysts anticipate continued market volatility in the coming months. The positive domestic growth factors are likely to compete with external headwinds, particularly those arising from ongoing trade disputes. The interplay between these conflicting forces is expected to shape market trends in the near term.

As India navigates through these challenging times, the resilience of its economy and the outcome of upcoming policy decisions will be crucial in determining the market's trajectory. Investors and market watchers will be keenly observing how the nation balances its domestic growth agenda with the evolving global economic landscape.

The Indian stock market witnessed a significant downturn on Tuesday, with the Nifty 50 index falling sharply amid concerns over US tariffs and widespread market weakness. The benchmark index closed near the day's low at 24,712, registering a substantial drop of 256 points.

Market Overview

The Nifty opened with a 68-point gap-down and continued to decline throughout the trading session. The index breached the key support level of 24,800 and fell below its 50-day Exponential Moving Average (EMA), reaching its lowest level since August 14.

Sector Performance

The market weakness was broad-based, with almost all sectoral indices ending in the red. Notable exceptions included:

• FMCG Sector: The Nifty FMCG index managed to buck the trend, emerging as the sole gainer among sectoral indices.
• Auto Stocks: Some auto stocks provided support to the market, with Eicher Motors and Maruti showing resilience.
• Consumer Staples: Hindustan Unilever and ITC also offered some support to the index.

On the flip side, major losers included Shriram Finance, Sun Pharma, and Tata Steel, contributing significantly to the index's decline.

Broader Market Trends

The sell-off was more pronounced in the broader market:

Sectoral indices that faced steep declines included Nifty Realty, Consumer Durables, and PSU Banks.

US Tariff Impact

A key factor influencing the market sentiment was the implementation of additional US tariffs. President Trump announced an increase in duties:

• New Tariff: Additional 25% duty
• Total Levy: Now stands at 50%
• Effective Date: August 27

This move has negatively affected Indian equities, contributing to the overall market weakness.

Technical Outlook

Technical analysts suggest that the Nifty now faces key support levels at 24,600 and 24,400. Resistance is expected around the 24,900-25,000 range.

As the market grapples with both domestic and international factors, investors and traders are advised to exercise caution and keep a close watch on global developments, particularly those related to trade policies and tariffs.