Indian stock market witnessed a strong across-segment selloff in intraday trade on Tuesday, August 26, with the Sensex falling nearly 700 points and Nifty dropping to near 24,750.

The sharp selloff could be largely attributed to concerns over Trump’s tariffs as the August 27 deadline for secondary tariffs approaches, with no signs of a trade truce between India and the US.

The Sensex opened at 81,377.39 against its previous close of 81,635.91 and crashed nearly 700 points, or 1 per cent, to an intraday low of 80,940.67.

The NSE benchmark Nifty 50 opened at 24,899.50 against the previous close of 24,967.75 and dropped by almost 1 per cent to its day’s low of 24,755.60.

The BSE Midcap and Smallcap indices underperformed by falling up to 1.5 per cent during the session.

The overall market capitalisation of BSE-listed firms dropped to nearly ₹450 lakh crore from ₹455 lakh crore in the previous session, making investors poorer by about ₹5 lakh crore.

Around 12:50 PM, the Sensex was 644 points, or 0.79 per cent, down at 80,992, while the Nifty 50 was trading at 24,787, down 181 points, or 0.72 per cent.

Why is the Indian stock market falling?

Experts highlighted the following five key factors behind the market selloff:

1. Trump tariff jitters

Contrary to expectations, India may now face a 50 per cent tariff on its exports to the US.

The Trump administration, in a draft notice published on Monday, August 25, detailed its plan to impose a 50 per cent tariff on Indian products as the August 27 deadline approaches.

There were expectations—especially after US President Donald Trump’s meeting with his Russian counterpart, Vladimir Putin—that the US could offer relief to India and withdraw the announced tariffs. However, this hope has now been dashed.

There are no indications that the US and India are actively engaged in trade negotiations at this stage. The Trump administration has stated that it imposed a 50 per cent tariff on India to discourage Russia from continuing its war in Ukraine and to bring it to the negotiation table.

Meanwhile, Trump on Monday threatened he could impose additional tariffs on countries that levy digital taxes on US digital service providers. Trump’s aggressive stance on tariffs indicates a global trade war may linger for longer than expected. 

Also Read | India Hires US Lobbying Firm With Trump Ties as Tariffs Loom2. Elevated valuation

The elevated valuation of the Indian stock market remains a key concern, weighing on market sentiment. Due to weak earnings, there is an earnings-valuation mismatch in the market, a key factor behind the trend of selling on rise.

“There is a mismatch between valuations and earnings growth. Currently, we are at 19 times the FY27 earnings, which is on the expensive side,” Shrikant Chouhan, the head of equity research at Kotak Securities, told Mint.

“Earnings could improve by Q3FY26 due to the previous quarter’s low base, the festival season’s effect, the good monsoon, and the rationalisation of GST rates. However, we must remember that the market often discounts many factors well in advance. We should remain cautiously optimistic in this situation,” Chouhan added.

3. FII continue selling Indian stocks

Foreign institutional investors (FIIs) have been relentlessly selling Indian stocks amid a largely stable US dollar and due to better investment avenues in other emerging markets.

So far in August, FIIs have sold off Indian equities worth ₹28,217 crore in the cash segment, after selling Indian stocks worth ₹47,667 crore in July.

“FII have been net sellers for most of 2025, and this trend continues in August, which has seen substantial outflows despite occasional daily inflows. When we examine the data for secondary and primary market inflows, it becomes evident that FIIs are still participating in the primary market. This indicates their ongoing investment in new themes and businesses, while they are reducing their exposure to sectors that are experiencing slower growth,” Vipul Bhowar, Senior Director, Head of Equities, Waterfield Advisors, noted.

4. Weak global cues

Weak global cues further dampened domestic market sentiment. Among Asian peers, Japan’s Nikkei and Korea’s Kospi declined by about 1 per cent each, tracking losses in key US indices after Trump fired Federal Reserve Governor Lisa Cook over alleged mortgage loan misconduct. 

Some experts believe Trump’s move raises questions about the independence of the US central bank. The US President has also been lashing out at Fed Chair Jerome Powell for not cutting interest rates.

5. Technical factor: 25k is a key hurdle for Nifty

Experts pointed out that the Nifty sees profit booking as it approaches the 25,000 level, making it a key hurdle for the index.

Chouhan of Kotak Securities said 25,000 will be the immediate breakout point. A successful breakout above this level can push the market towards 25,150-25,200.

On the other hand, 24,900-24,850 will act as key support zones for the day’s trading. Below 24,850, the chances of reaching 24,750-24,670 increase significantly, said Chouhan.

According to Anand James, Chief Market Strategist at Geojit Investments, the index’s inability to close above the 25,000/25,033 on Monday suggests that buyers are not keen on chasing prices higher.

“This leaves room for dips. Upswing possibility could diminish if Nifty slips below 24,870, but it would require a direct fall below 24,740 to initiate downside plays,” said James.

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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.