Indian equity markets ended sharply lower on August 1 as broad-based selling took hold on the first day of the August derivatives series. Concerns over US tariffs, weak earnings, and persistent foreign capital outflows spooked investors.
The Sensex closed 586 points, or 0.72 per cent, lower at 80,599.91, while the Nifty 50 settled at 24,565.35, down 203 points, or 0.82 per cent. The BSE Midcap and Small-cap indices fell even more steeply—by 1.37 per cent and 1.59 per cent, respectively.
The sharp sell-off wiped out more than ₹5 lakh crore of investor wealth in a single session, with the total market capitalisation of BSE-listed firms dropping to ₹444.5 lakh crore from ₹449.7 lakh crore the previous day.
Here are the five key factors behind the decline:
Uncertainty lingers after President Donald Trump’s announcement on July 30 of 25 per cent tariffs on Indian exports to the US. The tariffs took effect on August 1.
While there is speculation that the tariff rate may be lowered to 15–20 per cent following negotiations, the ambiguity surrounding the “penalty” Trump mentioned for India’s purchase of Russian oil has rattled investors.
“The Indian equity market extended its decline for a second day, pressured by renewed tariff threats and punitive duties that could undermine India’s global trade competitiveness,” said Vinod Nair, Head of Research, Geojit Financial Services.
Foreign portfolio investors (FPIs) have continued offloading Indian equities. In July alone, FPIs sold equities worth ₹47,667 crore in the cash segment due to stretched valuations, lacklustre earnings, and a firm dollar.
“Investor sentiment weakened further as FIIs now hold the second-highest net short position in derivatives, reflecting elevated caution. Globally, markets turned negative amid rising US inflation and trade tensions,” Nair added.
A sharp rise in the US dollar also weighed on sentiment. The dollar index rose to 100.26 during the session—its highest since May 29.
A stronger dollar generally dampens investor interest in emerging markets like India, as it accelerates foreign outflows, weakens the rupee, and increases input costs for companies.
Though most Q1 earnings have been in line, they do not justify current market valuations. This continues to limit market momentum.
“Markets continue to grapple with a mixed earnings season, while the recent tariff announcement and persistent foreign fund outflows are further weighing on sentiment,” said Ajit Mishra, SVP of Research at Religare Broking.
Experts believe earnings may pick up in the second half of the year, but caution that much will depend on macroeconomic trends and how the tariff situation evolves.
The Nifty broke its support at 24,600 and is now eyeing 24,450. Analysts warn that a further drop to around 24,200 is possible if the support does not hold.
“Nifty is now approaching its next crucial support at 24,450. A breach of this level could trigger a retest of the 200-day EMA near 24,180. On the upside, the 24,800–25,000 zone is expected to act as a strong hurdle,” said Mishra.
Rupak De of LKP Securities, noted that Nifty failed to reclaim the 200-DMA on the hourly chart despite Thursday’s rebound. It also stayed below the 50-EMA throughout the day.
“Sentiment remains weak, with the potential for the correction to extend towards 24,400–24,450. A further decline is likely if it slips below 24,400; otherwise, a recovery can be expected. Resistance is seen at 24,600–24,650 and 24,850,” De said.
