By Krishna Dua 
Nifty 50 Slides 0.6% as U.S. Tariffs Hit Indian Markets
The Indian equity markets faced another day of selling pressure, with the Nifty 50 index sliding approximately 0.6% on Thursday, August 28, 2025. This downturn is a direct continuation of the bearish sentiment that gripped the market following the implementation of a new 50% tariff by the U.S. government on a wide range of Indian goods. The Nifty 50, which had already fallen by over 1% on Tuesday, continued its downward trajectory, dipping below the crucial 24,600 mark and putting the key 24,500 support level squarely in focus for traders and investors. The market’s weakness was amplified by sustained foreign institutional investor (FII) outflows and a broader risk-off mood in global markets.
The Immediate Impact of U.S. Tariffs
The U.S. government’s decision to impose an additional 25% tariff, bringing the total duty to 50% on certain Indian exports, has been the single most significant factor driving the recent market volatility. This measure, which took effect on August 27, 2025, has sent a shockwave through the Indian economy, particularly affecting labor-intensive sectors such as textiles, gems and jewelry, apparel, and seafood. According to a report by the Global Trade Research Initiative (GTRI), approximately two-thirds of India’s total exports to the U.S., valued at around $60.2 billion, are now subject to this punitive tariff. The GTRI’s founder, Ajay Srivastava, described the tariffs as one of the most severe trade shocks India has faced in recent years.
The market had been holding out hope for a delay or a more favorable resolution through diplomatic talks, but that hope has faded. The abrupt imposition of the tariffs has triggered a widespread sell-off, as investors reassess the potential for a significant hit to corporate earnings in export-oriented companies. The lack of a clear timeline for the resolution of this trade dispute has created a prolonged period of uncertainty, which is weighing heavily on investor sentiment. While government sources have stated there is “no cause for panic” and that communication channels with the U.S. remain open, the market’s reaction reflects a cautious and nervous outlook.
Foreign Institutional Investors (FIIs) Turn Net Sellers
The negative market sentiment has been exacerbated by the continued selling spree by Foreign Institutional Investors (FIIs). On Tuesday, August 26, FIIs were net sellers to the tune of ₹6,516.49 crore in the cash market. This outflow, one of the largest in recent times, highlights the loss of confidence among foreign investors in the wake of the U.S. tariffs. FIIs have been net sellers for much of August, pulling out significant capital from the Indian market.
In contrast, Domestic Institutional Investors (DIIs) have been a source of strength, acting as a crucial counterbalance to the FII selling. On Tuesday, DIIs were net buyers, injecting ₹7,060.37 crore into the market. This aggressive buying by DIIs, fueled by strong inflows into mutual funds, has prevented a more severe market crash. However, the sustained FII selling pressure continues to pose a significant risk, and a prolonged trend of foreign capital flight could have a lasting impact on the market’s health.
Technical Outlook and Key Support Levels
From a technical perspective, the Nifty 50’s recent price action is a cause for concern for traders. The index’s sharp drop has pushed it below the key 24,800 support level, which many analysts had been monitoring. On Thursday morning, the Nifty opened with a gap down and was trading below 24,600, putting the next significant support level at 24,500 in play.
According to technical analysts, the index has also formed a bearish “head and shoulders” pattern on daily charts, and its Relative Strength Index (RSI) has entered a bearish crossover, indicating weakening price momentum. Rupak De, Senior Technical Analyst at LKP Securities, warned that the index is likely to remain under selling pressure as long as it trades below the 24,850 mark. He suggested that the correction could extend further towards 24,150 if the 24,500 support level is decisively broken.
On the other hand, some analysts believe that the 24,500-24,400 zone could act as a strong support area, where a bounce-back could occur. Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, noted that the underlying short-term trend is weak, and any bounce could be used as a “sell-on-rise” opportunity. The market’s volatility, as gauged by the India VIX, has also seen a significant jump, reflecting the heightened caution and uncertainty among traders.
Sector-Specific Impact and Strategies
The impact of the U.S. tariffs is not uniform across all sectors, leading to a rotation of capital within the market.
- Export-Oriented Sectors: Industries that rely heavily on exports to the U.S., such as textiles, gems and jewelry, and IT, have been hit hard. The IT sector, while not directly affected by the tariffs, has faced selling pressure due to FII outflows and concerns over a potential U.S. economic slowdown.
- Domestic-Focused Sectors: In contrast, sectors driven by domestic consumption have shown relative resilience. The FMCG and Automobile sectors, in particular, have fared better than the broader market. The Nifty FMCG index was one of the few sectoral indices to end in the green on Tuesday, as investors sought refuge in defensive stocks with strong domestic demand.
- Financials: The banking and financial services sector, a heavyweight in the Nifty 50, has borne the brunt of the sell-off. The Nifty Bank index has underperformed, with heavyweights like HDFC Bank and ICICI Bank contributing to the losses. The sector’s vulnerability is linked to FII selling and concerns over a potential slowdown in credit growth if the broader economy is affected.
For investors, the current market environment calls for a cautious and selective approach. Experts recommend a “buy-on-dips” strategy for long-term investors, focusing on fundamentally strong stocks in domestic-driven sectors. For short-term traders, a “sell-on-bounce” approach is advised, as the market is likely to remain under pressure in the coming sessions. The market will closely watch for any signs of de-escalation in the trade tensions or a strong policy response from the Indian government to support the affected exporters