Rs 6 lakh crore gone! Sensex falls 849 points, Nifty slips below 24,750. Trump tariff bomb and 6 other reasons why stock market fell today

Indian benchmark indices Sensex and Nifty ended lower on Tuesday, after the United States issued a draft notice to impose tariffs of up to 50% on Indian goods starting Wednesday. The trade shock was the biggest drag on sentiment, with investors also digesting other pressure points, from currency moves to foreign investors selling, compounding the decline.

The S&P BSE Sensex fell 849.37 points or 1% to close at 80,786.54 level, while the NSE Nifty 50 dropped 255.70 points or 1%, to end at the 24,712.05 mark.

The market capitalization of all listed companies on the BSE shrank by Rs 6.02 lakh crore to Rs 449.38 lakh crore.

Reliance Industries, the third-largest weight on the Nifty 50, slid more than 2% on Tuesday, dragging the index lower as selling spread across major sectors.

Financial stocks dropped 1.4%, with the heavyweight HDFC Bank and ICIC BAnk down between 0.8% and 1.5%.

Pharmaceuticals shares shed 1.7%, with heavyweight Sun Pharma down over 3% after BofA downgraded the stock to 'underperform', citing risks to premium valuations.

Consumer shares stood out as the lone bright spot, with the Nifty FMCG index rising 0.8%. Meanwhile, losses extended to textile, chemical and shrimp producers, sectors seen as particularly vulnerable to fresh U.S. tariff measures.

In single-stock moves, Vodafone Idea tumbled as much as 10% after reports suggested the government was unlikely to provide further relief on its long-standing dues.

Broader markets also came under pressure, with mid-cap shares down 1.6% and small-caps sliding 2%.

Here are seven key factors behind today’s decline:

1. U.S. tariffs take effect at midnight

Markets soured after President Donald Trump unveiled an additional 25% tariff on Indian exports tied to India's Russian oil purchases, doubling existing levies to 50%. A draft notice from the Department of Homeland Security on Monday laid out implementation procedures, while a planned Aug. 25–29 visit by U.S. trade negotiators to New Delhi was abruptly cancelled.

With Indian exporters now facing some of the highest U.S. duties globally, well above rivals such as Vietnam and Bangladesh, investors had hoped for a delay or compromise. Instead, confirmation of the tariffs erased those expectations and hit sentiment in early trade.

The new duties will apply to goods entering the U.S. for consumption or withdrawn from warehouse for consumption from 12:01 a.m. EDT on Wednesday, or 9:31 p.m. IST, according to the Homeland Security notice.

2. Profit booking after last week's rally

After a strong run last week on optimism around goods and services tax (GST) reforms, investors locked in gains.

Prime Minister Narendra Modi said earlier this month that the government intends to lower GST rates on several categories of goods and services by Diwali, India’s peak shopping season. Proposals under discussion include cutting GST on small cars to 18% from 28% and reducing health and life insurance premiums to as little as 5% or even zero.

Financial stocks led the retreat on the day, with the Nifty Bank index down 1.3% and the Nifty PSU Bank index slipping nearly 2%, dragged by HDFC Bank and ICICI Bank, both down about 1%.

IT firms, which earn a large share of their revenue from the U.S., ended 0.6% lower.

3. FII selloff

Foreign Institutional Investors (FIIs) pulled another Rs 2,466 crore from Indian equities on August 25, even as Domestic Institutional Investors stepped in with net purchases of Rs 3,176.69 crore.

The selling is part of a broader trend: FIIs have offloaded about Rs 31,889 crore across eight sectors in the first half of August, led by financials and technology. Net equity sales for the month so far stand at Rs 20,976 crore, extending July’s withdrawals and pushing year-to-date outflows to roughly Rs 1.2 trillion.

Brokerage firm Jefferies said on August 13 that foreign portfolio investor positioning in India is at “decadal lows.” While steady domestic inflows are helping cushion the impact, analysts warn that rebounds may prove short-lived.

“Persistent FII outflows, with foreign investors remaining net sellers in the Indian market, continue to weigh on sentiment,” said Jateen Trivedi, vice president and research analyst for commodities and currencies at LKP Securities.

4. Rupee weakness

The Indian rupee extended losses for a fifth straight session on Tuesday, ending 0.1% lower at 87.68 per U.S. dollar, as traders braced for 50% tariffs on Indian goods effective August 27.

The decline in the currency compounded selling pressure in equities, as a weaker rupee raises import costs and squeezes corporate margins.

Meanwhile, the dollar also came under pressure after President Donald Trump announced the removal of Federal Reserve Governor Lisa Cook, citing allegations of mortgage fraud, an unprecedented move that rattled confidence in the Fed’s independence. The dollar index, which tracks the greenback against a basket of currencies, retreated 0.05% after a 0.7% gain on Monday.

The persistent depreciation of the INR is adding pressure and may further impact foreign institutional inflows, said Vinod Nair, Head of Research at Geojit Investments.

5. Global markets decline

World stocks pulled back from record highs as investors digested fresh political turbulence in Washington and renewed policy uncertainty. U.S. President Trump said he was removing Federal Reserve Governor Lisa Cook from the board, accusing her of improprieties in securing mortgage loans. Cook rejected the move, saying she had “no intention of being bullied to step down.”

The president’s latest clash with the Fed clouded the policy outlook ahead of the central bank’s Sept. 16–17 meeting. Japan’s Nikkei slipped nearly 1%, while Europe’s STOXX 600 lost 0.8%. In France, government instability fueled sharp declines in bonds and banking stocks as the minority administration faced rising odds of being ousted next month.

Investors are now awaiting Friday’s release of U.S. personal consumption expenditures data, the Fed’s preferred inflation gauge, after hotter-than-expected producer prices last month called into question the certainty of an imminent rate cut.

Adding to the unease, Trump threatened “subsequent additional” tariffs on countries with digital taxes, reviving concerns over global trade tensions.

6. Crude oil near 2-week high

Crude oil prices fell on Tuesday but hovered near two-week highs, stoking worries about rising input costs for Indian companies.

Brent crude slipped 51 cents, or 0.7%, to $68.29 a barrel at 0810 GMT, while West Texas Intermediate lost 57 cents, or 0.9%, to $64.23.

Both benchmarks had surged nearly 2% in the previous session, with WTI breaking above its 100-day moving average, as traders tracked developments in the Russia-Ukraine conflict for possible supply disruptions.

Rising crude costs threaten to erode margins for fuel-heavy industries, a pressure already evident as the oil and gas index slipped nearly 1.6% on the day.

7. Technical signals flag caution

The Nifty fell sharply on the day, breaking below the support level of 24,800, said Rupak De, Senior Technical Analyst at LKP Securities, adding that "today’s decline was severe, pushing the index under the critical 50-day EMA."

"The RSI has entered a bearish crossover, indicating weakening price momentum. In the short term, the index is likely to remain under selling pressure as long as it trades below 24,850. On the downside, the correction could extend towards 24,150 or lower," said De.

Meanwhile, with the Nifty slipping below its immediate support at the 20-day exponential moving average (20-DEMA) and the banking index breaching the critical base around 54,900, further downside cannot be ruled out, said Ajit Mishra, SVP, Research at Religare Broking.

"We expect the index to fill the recent gap and retest its medium-term moving average around 24,600. Traders are advised to align their positions accordingly," said Mishra, adding that going ahead, export-oriented sectors may continue to face selling pressure on any uptick, while domestic demand-driven segments like FMCG and consumer discretionary could offer relative stability.