Markets Commentary Aug 26: Indian Stock Market Falls as US Proposes 50% Tariffs on Indian Exports

Mumbai, Aug 26, 2025: Indian equities came under pressure as concerns over US trade policy dampened sentiment after Washington issued a draft notice proposing tariffs of up to 50% on Indian exports, effective from Wednesday. The benchmark Nifty index faced selling pressure, with notable weakness seen across Healthcare, Pharma, PSU banks, Financial Services, Energy, and Oil & Gas stocks.

In contrast, select pockets such as Consumer Goods and Automobiles displayed resilience and managed to hold firm. On the derivatives front, market activity was influenced by the August monthly expiry.

The highest call open interest was concentrated at the 25,000 and 24,800 strike prices, while significant put open interest was seen at the 24,700 and 24,800 strikes. The put–call ratio (PCR) stood at 0.67, reflecting a cautious undertone among market participants.

Benchmark indices closed sharply lower on Tuesday, August 26, amid intense selloff pressure across key sectors, with bears firmly in control of Dalal Street. The sharp correction was triggered by geopolitical jitters after a draft proposal surfaced indicating former U.S. President Donald Trump's intent to impose a steep 50% tariff on Indian imports. The Nifty 50 plummeted 255 points, or 1.02%, to settle at 24,712.05, reflecting broad-based weakness. Sectoral breadth was deeply negative, with Realty, PSU Banks, Pharma, and Small Caps leading the laggards. Midcap and Energy counters also witnessed profit-booking, shedding over a percent each. Metals, Infra, Oil & Gas, and Private Banking names traded in the red, mirroring the broader downtrend. On the flip side, FMCG stocks bucked the trend, emerging as the lone sectoral gainer with a solid uptick of around 1%, signaling a flight to defensives. Auto stocks failed to hold ground and closed lower, dragged by persistent selling pressure. Market volatility spiked, with the India VIX climbing over 3%, signaling heightened risk aversion and caution among market participants.

Nifty Outlook

The index formed a sizable bear candle with a lower high and lower low signaling corrective bias. Index in the process filled the last Monday’s gap up area and closed below the 20- & 50-days EMA. Going ahead a follow through weakness below the lower band of the last Monday’s gap (24,673) will open further downside towards 24,500-24,400 levels in the coming sessions. While holding above the lower band of the gap will signal consolidation in the range of 24,670-25,000. We recommend a staggered accumulation approach, focusing on fundamentally sound counters, particularly those likely to be beneficiaries of the upcoming GST rationalization. While the short-term support base higher towards 24,500-24,350 levels being the confluence of the 100 days EMA and the recent lows placed around 24,350 levels.

Bank Nifty Outlook

Bank Nifty formed a sizable bear candle with a lower high and lower low signaling continuation of the corrective decline as the index closed below the 100 days EMA. Index in the process closed below the last 3 weeks range (54,900-56,100) highlighting extension of the decline. Going ahead, failure to move above 55,000 will keep the bias down and will open downside towards 54,000 and 53,500 levels in the coming sessions. Key support is placed at 53,500 levels being the confluence of the 200 days EMA and the low of May 2025. 

Indian equities extended losses on Tuesday, weighed down by escalating global trade concerns ahead of the implementation of fresh US tariffs on Indian goods. US President had notified an additional 25% duty, taking the total levy to 50%, which comes into effect from August 27. The Nifty100 fell 1%, while the Nifty Midcap100 and Smallcap100 underperformed, declining 1.6% and 2%, respectively. Sectorally, FMCG was the lone gainer (+0.9%) on expectations of meaningful GST rate reforms, while all other indices ended in the red.

FMCG stocks also found support as the government readied the second major fiscal stimulus of FY26 after personal income tax cuts, with the GST Council expected to discuss shifting food and textiles into the 5% slab, along with rate cuts for cement and insurance. Globally, sentiment was further hit after the US President moved to fire Fed Governor Lisa Cook on allegations of falsifying mortgage documents, while also threatening export curbs on chips in retaliation against digital services taxes.

Indian markets will remain closed tomorrow on account of Ganesh Chaturthi. Investors will keep a close watch on any deferral of the secondary tariffs on Indian goods, as that could meaningfully lift near-term market sentiment.

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Attributed to: Motilal Oswal Financial Services, Bajaj Broking Research, Ashika Institutional Equities