Summary
- Indian blue-chip indices recorded their fifth straight weekly loss, marking the longest losing streak in two years.
- US administration, under President Donald Trump, imposed a 25% tariff on Indian exports, intensifying global trade concerns.
- Persistent foreign portfolio outflows exacerbated the slide in Indian equities.
- The Nifty 50 and Sensex closed lower, reflecting investor caution and volatility across benchmarks.
- The Indian rupee slid to a fresh record low, pressured by dollar strength, tariff fears, and consistent outflows.
- The Reserve Bank of India (RBI) intervened multiple times to stabilize the rupee and limit market losses.
- Broader markets and blue-chip stocks saw significant profit booking, highlighting investor risk aversion.
- Auto and pharma sectors were notably hit due to trade policy uncertainty.
- Market experts and economists expressed increased caution regarding further rallies given ongoing macroeconomic headwinds.
Indian stock markets suffered their longest and steepest losing streak in two years, with blue-chip indices logging a fifth consecutive weekly loss amid renewed global trade tensions and sustained foreign investment withdrawals, as detailed by Reuters and The Economic Times. Friday’s session proved pivotal as the US reaffirmed a 25% tariff on Indian goods, escalating market jitters and casting a shadow over investor sentiment.
What Role Did US Tariffs Play in Triggering the Market Decline?
As reported by Reuters, Indian benchmark indices fell sharply, culminating in their fifth weekly loss. The US administration's announcement reaffirming a hefty 25% import duty on Indian exports heightened fears of retaliatory moves and global economic slowdown. This announcement, led by President Donald Trump, came as a surprise to the market and shifted the entire trading sentiment, according to coverage in The Economic Times by staff journalists.
Amit Khurana from Dolat Capital Market told The Economic Times,
“Despite the movement, there is no sign of panic among traders, as further escalation appears unlikely.”
However, he cautioned that ongoing headwinds from the tariff regime continue to restrict market recoveries.
How Did Foreign Outflows Exacerbate the Losses?
According to Ashwin Manikandan of Reuters and additional detail from The Economic Times, a significant portion of the recent declines stemmed from persistent outflows by foreign portfolio investors. In July alone, international investors sold nearly $2 billion worth of Indian equities, intensifying pressure on broader market benchmarks and the rupee.
The deteriorating outlook prompted the Nifty 50 to fall 0.35% to 24,768.35 and the Sensex to shed 0.36% to close at 81,185.58 during Thursday’s trade. Throughout the day, both indices moved between gains and losses, highlighting heightened uncertainty and reduced risk appetite among market participants.
What Caused the Rupee to Hit a Record Low?
According to Economic Times market correspondents, the Indian rupee closed at a historic low of 87.59 per dollar on Thursday, heavily pressured by sustained foreign outflows, tariff threats, and a surging dollar index. Earlier in trading, the rupee touched 87.74/$1 before modest intervention from the Reserve Bank of India stabilized the currency slightly.
“Importers started to hedge as soon as the rupee crossed 86.90/$1 previously. I think the central bank will intervene and will not let the rupee cross record low levels,” said Anindya Banerjee, head of FX research at Kotak Securities, in comments to The Economic Times.
Reuters market reporter Ashwin Manikandan noted,
“The rupee fell to a more than five-month low of 87.74 following U.S. President Donald Trump's threat of a 25% charge on Indian exports… [and] ended the day at 87.5950, reflecting a decrease of 0.2%.”
For the month, it marked a depreciation of 2%, its largest drop since September 2022.
What Was the RBI’s Response to the Downward Pressure?
Traders and analysts across multiple media outlets emphasized that the RBI was actively intervening in forex markets but was measured in its approach. According to Ashwin Manikandan of Reuters,
“The Reserve Bank of India likely stepped in to bolster the rupee on Wednesday and Thursday, though they indicated that the intervention was not overly forceful.”
However, with relentless demand for dollars from Indian importers—in particular those in the oil and technology sectors—the rupee’s recovery was limited.
Which Sectors Were Most Affected by the Policies and Outflows?
Based on comprehensive coverage by The Economic Times and Rediff, blue-chip stocks saw the sharpest decline, with specific drag from auto and pharma counters given their sensitivity to trade policy changes. The Sensex plunged by as much as 542 points during intraday trade on July 24, as foreign institutional investors continued profit-taking, especially from premium stocks like Trent, Tech Mahindra, Bajaj Finserv, Reliance Industries, Infosys, and HCL Technologies.
“The broad market indices also fell, with Nifty Midcap 150 dropping 0.8% and Nifty Small-cap 250 declining 0.9%,” reported The Economic Times, underlining the widespread nature of the sell-off.
How Did Market Volatility Respond to These Developments?
Market volatility spiked notably, with the Volatility Index (VIX)—commonly known as the ‘fear gauge’—rising 3% to 11.54, as per The Economic Times. This uptick indicates heightened concern among traders regarding future price swings and confirmed the caution in market sentiment.
Will Tariff and Outflow Pressures Continue to Weigh on Indian Markets?
Economists at QuantEco, interviewed by Reuters, expect continued vulnerability for the rupee, projecting a further drop to the 89.50 level by March if dollar sentiment remains bullish and global geopolitical uncertainties persist.
Sriram Velayudhan, senior vice president at IIFL Capital Services, told The Economic Times that,
“Investor sentiment will remain cautious owing to headwinds like weak earnings, depreciating rupee, uncertainty around trade agreement and foreign outflows. Rallies in the short term may face resistance…”
Are There Any Positive Triggers on the Horizon?
Market experts from Rediff and the Economic Times suggest that any rebound in Indian equities will require a positive breakthrough in US-India trade negotiations, a stabilization of foreign investor flows, or a decisive recovery in the rupee. Without such catalysts, any upward movement is likely to be capped by persistent worries regarding global trade, further policy surprises, and economic challenges.
In conclusion, as meticulously reported by journalists across Reuters, The Economic Times, and Rediff, Indian blue-chip indices face ongoing turmoil from the dual shock of stringent US tariffs and relentless foreign outflows. Authorities including the RBI are intervening to prevent deepening losses, but with caution now the overriding theme among investors, the trajectory for Indian markets and their currency remains fraught with uncertainty.