At 11:20 a.m., the BSE Sensex fell 517.84 points, or 0.63%, to 81,482.87, while the NSE Nifty shed 161.75 points, or 0.64%, to trade at 24,922.
The benchmarks had rallied more than 2% over the past six sessions on optimism over Goods and Services Tax reforms and an S&P sovereign rating upgrade.
Here are the five key factors behind today’s decline:
1. Caution ahead of Jackson Hole
Investors largely kept to the sidelines ahead of Federal Reserve Chair Jerome Powell’s speech at the Fed’s annual Jackson Hole gathering. Markets are seeking clarity on whether the U.S. central bank will trim rates by 25 basis points in September as widely expected. Bets on a cut have moderated after minutes from the Fed’s July meeting showed divisions among policymakers.
Lower U.S. rates typically enhance the appeal of emerging markets such as India, but uncertainty has weighed on sentiment.IT stocks, which had gained 3% in the last three sessions, slipped 0.6% Friday.
2. U.S. tariff concerns
U.S. President Donald Trump earlier this month announced an additional 25% tariff on Indian goods, effective August 27. The duties, which could lift levies on some exports to as high as 50%, mark some of the steepest applied to any U.S. trading partner.
“The headwinds for the market from Trump tariffs will weigh on markets constraining the rally of the last six days,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments. Vijayakumar warned that if the tariff kicks in as expected, the impact on India’s growth will exceed the 20–30 basis points currently estimated.
3. Profit taking after 6-day rally
After a six-day surge, investors booked profits, particularly in financials and IT, dragging major sectoral indices lower.
The Nifty and Sensex had gained 2.4% and 2.2%, respectively, during the six-day winning run, driven by optimism over a consumption boost from Goods and Services Tax revisions and an S&P sovereign rating upgrade.
On the day, HDFC Bank and ICICI Bank were among the key laggards, falling over 1% each. Pharma and consumer durables were the only sectors to buck the trend.
4. FII selling pressure
Foreign institutional investors continued to trim holdings, offloading Rs 31,889 crore in eight sectors during the first half of August, led by financials and IT. In total, FIIs have sold Rs 20,976 crore worth of equities in the period, extending July’s withdrawals and bringing this year’s net outflows to about Rs 1.2 lakh crore.
Jefferies noted on August 13 that foreign portfolio investor positioning in India is at “decadal lows.” While robust domestic inflows offer some downside protection, the brokerage cautioned that rebounds “may not sustain for long.”
5. Technicals signal insufficient momentum
On the charts, the Nifty’s rally lost steam near 25,153, “within touching distance” of Geojit’s near-term objectives, said Anand James, the firm’s Chief Market Strategist. James said indicators show insufficient momentum to push higher, though he does not expect a collapse.
Shrikant Chouhan, Head of Equity Research at Kotak Securities, said the market showed “indecision between the bulls and bears” after a gap-up opened. Chouhan pegged support at 25,000/81,700 and 24,950/81,500, with resistance near 25,150/82,300 and 25,250/82,500. A break below 24,850/81,200, however, could sour sentiment further.
For the Bank Nifty, Chouhan flagged an “inside body” pattern, saying a rise above 56,000 could open the door to 56,200–56,500, while a drop below 55,500 may trigger weakness toward 55,350–55,000.
Also read | Rs 32,000 crore FII selloff in 8 sectors! Time for a U-turn now?
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)