The Indian stock market has been reeling under selling pressure, with both the benchmark indices, Sensex and Nifty 50, trading lower for the sixth consecutive session on Friday, weighed down by concerns over higher tariffs on Indian goods imposed by the US President Donald Trump.
However, the genuine strain on Indian markets stems from a more profound, domestic slowdown, overshadowing the distractions of Trump tariffs, experts believe. With a lack of significant earnings growth, sluggish consumer spending, and persistent outflow of foreign funds, markets are aimlessly fluctuating without any strong triggers to move clearly in either direction.
Market analysts believe that the benchmarks have overlooked three significant negative factors, including foreign institutional investor (FII) selling, lackluster performance by Indian companies in Q1FY26, and the depreciating Indian rupee.
On Friday, Nifty 50 slipped below 24,500, a critical level that has taken support multiple times since May. If Nifty 50 continues to sustain below this level, then we may see further correction towards 24,000-24,200 that coincides with the bullish gap left on 12th May along with the 200-Day Simple Moving Average (SMA), said Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.
According to Motilal Oswal Financial Services, the immediate support for Nifty 50 is at 24,442 then 24,350 zones, while resistance is seen at 24,750 then 24,900 zones.
According to the brokerage house, Nifty 50 needs to cross and hold above 24,600 zones strength to see an upside towards 24,750 and 24,900 zones. Else, weakness can be seen towards 24,442 and 24,350 zones.
What are the factors, other than tariffs, weighing on markets?
Mohit Gulati, the CIO and managing partner of ITI Growth Opportunities Fund, said that beyond the noise of Trump Tariffs, the real weight on Indian markets is a deeper, domestic pause. After nearly 3–4 years of post-COVID revenge spending, the consumer has hit the brakes.
“We’re seeing clear signs: volume growth in FMCG is tapering, discretionary retail is under pressure, and even bellwethers like paints are reporting muted demand. This isn’t a blip — it’s stagflation in motion. With no real earnings momentum, tepid consumption, and policy rates stuck in limbo, markets are drifting without a catalyst to push decisively in either direction,” said Gulati.
Subdued Earnings
The earnings growth during the first quarter of FY26 remained subdued. The overall earnings growth was driven by BFSI, Technology, Oil & Gas, Cement, and Utilities. These five sectors contributed 71% to the incremental YoY accretion in earnings so far.
High Valuations
Nifty 50 is trading at a 12-month forward P/E ratio of 21.1x, near its LPA (long period average) of 20.7x , which is at a 2% premium. In contrast, its P/B of 3.1x represents a 10% premium to its historical average of 2.8x.
The 12-month trailing P/E for the Nifty, at 23.7x, is above its LPA of 22.9x (at a 3% premium). At 3.5x, the 12-month trailing P/B ratio for the Nifty is above its historical average of 3.1x (at an 11% premium), MOFSL said in a report.
In P/E terms, the MSCI India Index is trading at a 66% premium to the MSCI EM Index, below its historical average premium of 80%.
FPI Outflows
Foreign Portfolio Investors (FPIs) have sold ₹1.08 lakh crore of Indian equities through secondary market in 2025 so far. On the contrary, FPIs have infused around ₹37,700 crore through the primary markets during the same period, as per NSDL data.
“Sustained FII selling will continue to be bearish factor. Modest earnings growth of around 10% for FY26 and relatively high valuations in India are triggering sustained selling by FIIs. These factors will weigh on markets. Strong and sustained buying by DIIs can prevent a big correction in the market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
