Sensex closes nearly 700 points down, Nifty 50 ends at 25,150. Why did the Indian stock market fall today?

Indian stock market suffered significant losses on Friday, with benchmarks the Sensex falling nearly 700 points and the Nifty 50 closing at the 25,150 mark.

The Sensex opened at 82,820.76 against its previous close of 83,190.28 and dropped 748 points, or almost 1 per cent, to an intraday low of 82,442.25.

The NSE counterpart Nifty 50 started the day at 25,255.50 against the previous close of 25,355.25 and declined by nearly 1 per cent to an intraday low of 25,129.

Finally, the Sensex closed 690 points, or 0.83 per cent, down at 82,500.47, while the Nifty 50 settled at 25,149.85, down 205 points, or 0.81 per cent.

The selloff was broad-based as the BSE Midcap and Smallcap indices also fell by 0.65 per cent and 0.70 per cent, respectively.

Among the sectoral indices, Nifty Auto and IT crashed nearly 2 per cent each, while Pharma and FMCG climbed by over half a per cent.

The overall market capitalisation of BSE-listed firms dropped to nearly ₹456.5 lakh crore from ₹460 lakh crore in the previous session, making investors poorer by about ₹3.5 lakh crore in a day.

Also Read | Sensex crashes 1%, investors lose ₹3L Cr— 10 key highlightsWhy did the Indian stock market fall today?

A combination of factors is dragging the domestic market down. Let’s take a look at five key factors behind the market selloff today:

1. Weak start to Q1 earnings

TCS reported Q1 numbers on July 10, which failed to meet market expectations. It was the IT giant’s third straight quarter of lower revenue.

As Mint reported, TCS recorded revenue of $7.42 billion in the June quarter, down 0.59 per cent quarter-on-quarter and 1.12 per cent from a year before. The earnings lagged estimates of 33 analysts polled by Bloomberg, who expected TCS to clock $7.54 billion in revenue. This was TCS’s worst Q1 performance since June 2020, when its revenue fell 7 per cent sequentially.

Also Read | TCS Q1 Results: 5 key highlights from June quarter earnings

Market participants pointed out that the weak start of the earnings season has further deteriorated market sentiment, which has already been fragile for over a month now due to tariff-related concerns and elevated valuations.

Also Read | Can Q1 results drive Nifty 50 to record highs despite no trade deal?2. Trump intensifies tariff tussle

US President Donald Trump further escalated the trade war as he, on Thursday, 11 July, announced a 35 per cent tariff rate for goods imported from Canada, starting August 1.

Moreover, he signalled that the baseline tariff rates for countries that do not get tariff letters could be set at 15 per cent or 20 per cent, higher than the current 10 per cent.

Trump’s fresh tariff threats have dashed hopes of an early resolution of the trade war, raising concerns that higher tariffs will drive up inflation and cause a global economic slowdown.

3. Stretched valuation of the market

As earnings remain sombre, the market’s premium valuation seems to have made investors cautious.

Shibani Kurian, senior fund manager and the head of equity research at Kotak Mahindra AMC, pointed out that in the near term, the market may give moderate returns as valuations are elevated.

“At present, Nifty trades at a PE (price-to-earnings) of nearly 22 times FY26E EPS (earnings per share), with consensus estimating earnings growth at low double digits for FY26E,” Kurian said.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, underscored that the overvaluation of the broader market is getting corrected.

“India is underperforming markets like South Korea, Germany, Japan and MSCI EM. This is largely due to the elevated valuations in India,” said Vijayakumar.

4. Investors rush to safe havens

Increasing tariff-related uncertainties have weakened investors’ risk appetites, as they are offloading riskier equities and rushing to safe-haven assets like gold.

MCX Gold August 5 contract jumped nearly 1 per cent to an intraday high of ₹97,548 per 10 grams, while MCX Silver September 5 contract hit a record high of ₹1,11,552 per kg in Friday’s session.

Also Read | Gold price jumps as Trump intensifies tariff war. Should you buy?5. Technical factor

The technical structure of the Nifty 50 indicate further weakness.

Praveen Dwarakanath, Vice President of Hedged.in, underscored that the Nifty broke down below the support at the 25,200 level, indicating weakness in the index.

The momentum indicators show signs of weakness in the index. The weekly expiry calls are written in higher volumes, also indicating that the weakness will continue, said Dwarakanath.

“The ADX DI+ line is sloping down, with the ADX DI- line sloping up, suggesting a further fall in the index from the current levels. The index closed below its 20-day moving average, further confirming the weakness in the index,” said Dwarakanath.

Rupak De, Senior Technical Analyst at LKP Securities, underscored that the Nifty continues to remain weak as the index slipped below the previous swing low on the hourly chart.

The index has fallen below the 21 EMA on the daily timeframe. Momentum also remains weak in the short term, with the RSI in a negative crossover. However, after the recent decline, the index has approached the support of the 200-hourly moving average, De noted.

“A move above 25,150-25,160 in the initial trading hour could trigger a rally towards 25,250 and 25,400. On the downside, support is placed at 25,090 and 24,900,” said De.

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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.