Indian equity markets decline as tariff worries deepen

Synopsis

Indian equity markets experienced a second consecutive day of losses due to escalating tensions between the US and India over tariffs. The NSE Nifty and BSE Sensex both declined by 0.9%. Investors are cautious amid a lack of positive triggers, with banking and IT sectors underperforming. Foreign portfolio investors continue to sell shares, contributing to the market's bearish sentiment.

Mumbai: Domestic equity indices extended losses for the second straight session on Thursday as investors remained on edge in the face of the growing tensions between Washington and New Delhi over US tariffs on Indian imports.

The NSE Nifty finished at 24,500.90, down 0.9% or 211.15 points. The BSE Sensex ended at 80,080.57, 0.9% or 705.97 points lower. Both indices have shed 1.9% in the past two days.

"The concerns on tariffs led to weaker sentiment and the monthly expiry further weighed in on the markets," said Sunny Agrawal, head of Fundamental Equity Research, SBICAPS Securities "There is a lack of positive triggers in the short term." He expects Nifty's downside to be restricted at 24,300.

Elsewhere in Asia, China gained 1.1% while Japan and South Korea rose 0.8% and 0.3% respectively. Indonesia moved 0.2% higher. Taiwan dropped 1.2% and Hong Kong declined 0.8%.

At home, the Nifty Mid-cap 150 and the Small-cap 250 indices declined 1.2% and 1.1%, respectively, on Thursday. Out of the 4,258 shares traded on BSE, 1,374 advanced, while 2,744 declined.

Agencies

In the previous two trading sessions, the mid-cap and small-cap indices tumbled 2.6% and 2.9% each each. All sectoral indices except the consumer durables index closed lower. The Nifty IT and Realty indices fell around 1.5%. Bank Nifty declined 1.2% while the private bank and PSU Bank indices shed 1% each.

"Bank stocks are under pressure due to the impact of NIM compression in Q2 earnings, while the IT sector has also underperformed," said Agrawal. "The focus can shift from capex-based sectors to consumption-based sectors like auto and FMCG as they have relatively outperformed and remain under-owned."

The recent underperformance in banking stocks is expected to continue, said Nilesh Jain, head of Derivatives and Technical Research, Centrum Broking.

"The rollover in Bank Nifty is expected to be lower given recent underperformance, and the positions are expected to be light," he said.

Foreign portfolio investors (FPIs) sold shares worth a net ₹6,516.5 crore on Thursday. Their domestic counterparts bought shares worth ₹7,060.4 crore. So far in August, global investors have dumped shares worth ₹33,323 crore.

FPIs' short positions in the Nifty have reduced from 92% earlier this month to 86% but the nervousness around tariffs could keep the bearish bets elevated.

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