Sensex, Nifty Fall for Third Day Amid US Tariff Concerns

The Indian stock market concluded the week on a negative note, marking its third straight session of declines as concerns over new US trade tariffs weighed heavily on investor sentiment.

The BSE Sensex fell 270.92 points, or 0.34%, to close at 79,809.65. Similarly, the NSE Nifty 50 index declined by 74.05 points, or 0.30%, to settle at 24,426.85. The market witnessed broad-based selling, with investors clearly unnerved by the potential economic impact of escalating trade tensions.

US Tariff Jitters Rattle Dalal Street

This week’s downturn is primarily driven by the implementation of steep new tariffs by the United States on a range of Indian imports. These tariffs, which reportedly took effect on August 27, have sparked fears about the profitability of India’s export-oriented sectors and the overall health of the economy.

When a major trading partner like the US imposes high taxes, it makes Indian products more expensive for American buyers. This can lead to lower sales for Indian companies, impacting their revenues and, consequently, their stock prices. Sectors heavily reliant on exports, such as IT and Auto, were among the hardest hit.

Market statistics reflected the nervous sentiment: on the BSE, 2,185 stocks declined while only 1,895 advanced, indicating that selling pressure was widespread.

Sectoral Performance: FMCG Stands Tall Amid Broad-Based Selling

The selling pressure was evident across most major sectors. The Nifty Auto and Nifty IT indices were among the top laggards, as companies in these sectors have significant exposure to the US market. Adding to the downward pressure, market heavyweight Reliance Industries (RIL) saw its shares decline by over 2% as investors monitored developments from the company’s 48th Annual General Meeting (AGM).

However, it wasn’t all doom and gloom. The Nifty FMCG (Fast-Moving Consumer Goods) index bucked the trend, closing with a gain of 0.95%. This resilience is common during times of uncertainty. FMCG companies, which sell essential household items, are considered “defensive” stocks because their business is less affected by economic downturns as demand for necessities remains stable.

FIIs Sell, DIIs Provide Cushioning Support

An interesting dynamic observed this week has been the contrasting behaviour of Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs).

FIIs continued their recent selling trend. Data from the previous session (Thursday) showed that FIIs offloaded equities worth ₹3,856.51 crore. This outflow of foreign capital is a key factor contributing to the market’s weakness.

Conversely, DIIs, which include Indian mutual funds and insurance companies, have been actively buying. On Thursday, DIIs made substantial purchases of stocks worth ₹6,920.34 crore, acting as a crucial cushion and preventing a steeper market fall. This indicates strong confidence from domestic fund managers in the long-term potential of the Indian market.

According to some analysts, a potential silver lining is the government’s plan for simplifying and rationalising the Goods and Services Tax (GST). Christopher Wood of Jefferies noted in his “GREED & Fear” report that such policy reforms might be preventing a more severe market correction in the face of the tariff threat.

Key Levels and Cues for Investors

For retail investors, the current market environment calls for caution over panic. Here are a few key factors to monitor:

• Nifty’s Support Levels: From a technical standpoint, the Nifty 50 has crucial support in the 24,400-24,350 zone. A decisive break below this level could trigger a further decline.
• Global Developments: Keep a close watch on official statements from both the US and Indian governments regarding trade tariffs. Any sign of negotiation or de-escalation could significantly boost market sentiment.
• FII/DII Activity: Continue to track the daily investment data. A reduction in FII selling or sustained strong buying from DIIs could signal that the market is nearing a bottom.
• GST Council Meeting: Positive announcements from the upcoming GST council meeting could lift sentiment, particularly for consumption-driven stocks.

The market is currently reacting to a significant international headwind. While the short-term trend appears weak, the underlying strength of the Indian economy, supported by robust domestic consumption and investment, remains a key long-term positive.

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Disclaimer: This article is for informational purposes only and should not be considered investment advice. Please conduct your own research before making any investment decisions.