The Indian stock market’s headline indices have been caught in a downturn towards the end of September as investors discounted the GST 2.0 bonanza and instead focused on the impact of Trump tariffs, which extended to services and sectors like IT and pharma this week.
Against this backdrop, the stock market bulls seemed to have camped on Dalal Street. Benchmark index Sensex has crashed 2,300 points and its NSE counterpart has dropped 675 points, losing 2.7% in value during the six-day selloff in the Indian stock market.
Amid this decline, Indian investors have lost 12.44 lakh crore in notional wealth as the market capitalisation of all listed companies declined to ₹453.29 lakh crore from ₹465.73 lakh crore as of September 18 (the day it saw the last positive close).
What’s behind the fall in Indian stock market?
The Indian stock market sentiment has taken a dip, with the markets caught in a range-bound mode since the announcement of 50% tariffs on Indian exports to the US. The 50% tariffs include the 25% reciprocal tariffs along with a 25% “penalty” by US President Donald Trump for importing cheap Russian crude oil.
The impact of the same has been felt by headline indices, including the export-oriented sectors like textiles, gems, jewellery, and shrimp.
From goods, the impact is now being felt by services sectors too as Trump announced a hike in the H-1B visa fee for new renewals to $1,00,000. IT stocks — which hold a considerable weight in the index — have seen a sharp fall, weighing on the overall market as well.
Now, today morning, Trump targeted the pharma sector as the US levied a 100% tariff on branded and patented pharmaceutical products.
“The Sensex’s 2,300-point slide over the past six sessions underscores how fragile sentiment has become in the face of back-to-back shocks. Trump’s 100% tariff announcement and the hike in H1-B visa fees have amplified fears that India’s two strongest external levers—IT services and pharma exports—are under strain,” said Harshal Dasani, Business Head, INVAsset PMS.
Moreover, the selling by foreign portfolio investors (FPIs), who have sold ₹1,44,085 crore worth of Indian stocks this year, has also kept indices’ upside in check as all these moves negated the positive macro setup, including the GST rate cut bonanza.
Over the past 18 months, markets have been range-bound. As and when the Nifty 50 comes close to the 25,500 range, something or the other tends to hit the market—knowingly or unknowingly—and it struggles to move up, said Kranthi Bathini, Director – Equity strategy, Wealthmills Securities.
What can revive stock market sentiment?
According to analysts, two factors hold the key to reviving the Indian stock market sentiment: Earnings and the India-US trade deal.
“At this juncture, both a positive India-US trade deal outcome and a strong earnings season could serve as stabilizers, but in different ways. A trade breakthrough would immediately ease concerns over tariffs and mobility, leading to a relief rally across sectors. Earnings, on the other hand, would restore confidence in India’s fundamental growth story,” said Dasani.
⦁ India-US trade deal
According to G Chokkalingam, Founder, Equinomics Research, until the market sees some optimism in terms of a bilateral treaty or agreement between the US and India being signed amicably, the market will remain subdued. There’s no other trigger right now — FPIs are selling, and there’s uncertainty around the deal signing, with the US going aggressive on tariffs against India, he said.
“So yes, the market is likely to stay subdued until some optimism emerges regarding the Indo-US relationship,” the market veteran added.
Dasani, however, believes that while the trade deal does carry more weight for sentiment in the near term, as it directly addresses the current trigger of the sell-off, without earnings follow-through in October–November, any rebound may prove short-lived.
⦁ Earnings rebound
Highlighting the market resilience in the face of multiple headwinds like tariffs, FPI selloff, rupee depreciation, Bathini said the missing link in the market is that all the positive macro cues and reforms — like GST — still need to translate into corporate earnings.
“Tariffs and trade tensions are mostly sentiment drivers—they influence short- to mid-term market moves. But ultimately, stock prices are slaves to earnings. If companies manage to post good earnings despite tariffs, the market won’t care as much about whether tariffs exist or not. At the end of the day, earnings are what matter most. If we can see earnings upgrades over the next couple of quarters, we might see the market sustain above 25,000 and potentially revisit previous highs. Until then, markets are likely to remain range-bound, with stock-specific and sector-specific movements dominating,” Bathini explained.
Is more pain ahead?
A steeper correction cannot be ruled out if US–India trade negotiations drag on or if additional protectionist measures emerge, said Dasani, adding that the risk is not only earnings downgrades in select export-linked sectors but also a dent in broader risk appetite that spills into banks and consumption. In the very near term, volatility is likely to remain elevated, with further downside possible if global cues worsen, he added.
Amid the uncertain stock market setup, analysts advise allocating to precious metals like gold while using the dips as an opportunity to accumulate stocks.
Investors can utilise dips to slowly accumulate high-quality stocks, particularly those that are driven by domestic consumption, opined Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Meanwhile, Chokkalingam said that a 5% to 10% allocation to gold is advisable because the current concerns are mostly about the external economy. He also advised holding 5% in cash.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
