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NIFTY50 Slips Below 24,800, SENSEX Falls 296 Points: Why Markets Rose After Trump’s Tariff Statement

 

On July 31, 2025, Indian equity markets experienced a volatile session, with the NIFTY50 closing below 24,800 at 24,768.35, down 86.70 points (0.35%), and the SENSEX shedding 296.28 points (0.36%) to settle at 81,185.58. The initial sell-off was triggered by U.S. President Donald Trump’s announcement of a 25% tariff on Indian exports, sparking concerns about trade disruptions. However, markets staged a partial recovery during the session, buoyed by optimism following a shift in Trump’s tariff stance. This blog analyzes the reasons behind the market’s initial decline, the subsequent rebound, and the broader implications for investors.

Why the Market Fell: Key Triggers

The sharp decline in the NIFTY50 and SENSEX was driven by several factors, with Trump’s tariff announcement being the primary catalyst:

  1. Trump’s Tariff Shock: On July 30, 2025, Trump announced a 25% tariff on Indian goods, effective August 1, 2025, along with penalties on India’s energy and defense dealings with Russia. This led to a knee-jerk sell-off, with the SENSEX dropping 800 points and the NIFTY50 falling over 200 points at the opening bell. Investors feared the tariffs would impact key export sectors like textiles, gems, jewelry, and IT.

  2. Sectoral Weakness: The IT sector was hit hard, with companies like TCS (down 1.5%) and Infosys facing pressure due to potential tariff-related disruptions in the U.S. market. The NIFTY IT index fell 3.9%, reflecting broader concerns about global trade tensions. Additionally, Tata Steel (down 2.7%) and Adani Enterprises were among the top losers, as metal and energy sectors faced tariff-related uncertainties.

  3. Foreign Institutional Investor (FII) Selling: Sustained FII outflows, with sales of ₹13,552 crore in the cash market the previous week, added to the bearish sentiment. This was exacerbated by global market volatility following Trump’s tariff announcements, which wiped out $2.4 trillion in market value on Wall Street.

  4. Weak Corporate Earnings: Disappointing Q1 results from companies like Kotak Mahindra Bank (down 5.5% due to lower profits and higher provisions) and Adani Enterprises (down 4% after a 50% YoY profit drop) further dampened investor confidence.

  5. Technical Pressure: The NIFTY50 faced resistance around 24,900 and failed to sustain early recovery attempts, with technical indicators like the Average Directional Index (ADX) signaling bearish momentum. Support levels at 24,450–24,650 were tested, contributing to the cautious market outlook.

Why the Market Recovered: Trump’s Tariff Reversal

Despite the initial sell-off, the NIFTY50 and SENSEX staged a sharp intraday rebound of over 1,100 points for the SENSEX, driven by a shift in Trump’s tariff rhetoric:

  1. Easing Tariff Concerns: Mid-session reports suggested Trump’s tariffs might be temporary or negotiable, with India and the U.S. sharing strong bilateral ties. Comments from industry leaders like Anish Shah of Mahindra & Mahindra, who expressed optimism about a “positive resolution on tariffs,” boosted investor confidence. This led to a rally in domestically focused sectors like FMCG, with HUL (up 3%) and ITC emerging as top gainers.

  2. Pharma Sector Resilience: The exemption of pharmaceutical products from Trump’s tariffs provided a significant boost. Sun Pharma, a top NIFTY50 gainer, rose 4.45% as investors gravitated toward sectors insulated from trade disruptions. This helped stabilize the broader market.

  3. Domestic Buying Support: Domestic Institutional Investors (DIIs) countered FII selling by purchasing equities worth ₹2,138 crore on July 25, providing crucial support at lower levels. Sectors like BFSI and FMCG, which are less exposed to U.S. tariffs, saw selective buying, aiding the recovery.

  4. Global Market Context: While Asian markets like China’s CSI 300 and Hong Kong’s Hang Seng remained under pressure, India’s markets showed relative resilience. Experts noted that India’s domestic-driven economy is less vulnerable to tariff shocks compared to export-heavy Asian peers, supporting a partial rebound.

Broader Implications for Investors

The volatile session on July 31, 2025, highlights the Indian market’s sensitivity to global trade developments. However, the partial recovery suggests cautious optimism. Key takeaways for investors include:

  • Sectoral Opportunities: Domestically oriented sectors like FMCG and BFSI offer relative stability amid tariff uncertainties. Pharma stocks, benefiting from tariff exemptions, may continue to outperform.

  • Volatility Ahead: With ongoing India-U.S. trade negotiations and no interim deal before the August 1 deadline, markets may remain volatile. Investors should monitor support levels (NIFTY50: 24,450–24,000) and resistance (24,900–25,000).

  • Stock-Specific Approach: Given mixed Q1 earnings, focus on companies with strong fundamentals and insulation from global trade risks, such as HUL, Jio Financial, and Sun Pharma.

Conclusion

The NIFTY50’s slip below 24,800 and the SENSEX’s 296-point fall on July 31, 2025, were driven by Trump’s tariff announcement and weak corporate earnings. However, the market’s partial recovery, spurred by optimism around tariff negotiations and strength in pharma and FMCG, reflects India’s resilience. As global trade dynamics evolve, investors should adopt a cautious, stock-specific strategy to navigate near-term volatility while capitalizing on India’s domestic growth story.

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