Indian Stock Market Drops: US Tariffs and Banking Sector Weigh on Sensex and Nifty.

The Indian stock market, represented by the Sensex and Nifty indices, has experienced a sharp decline due to a 25% punitive tariff imposed by the US on Indian imports. The BSE Sensex has dropped 671 points, while the NSE Nifty has slipped 190 points. Banks are leading the laggards, causing a significant downturn in the market.

The Indian stock market experienced a significant downturn on Tuesday, July 2, 2025, following a U.S. draft notice that proposed tariffs of up to 50% on Indian goods. The announcement, coupled with currency fluctuations and foreign investor selling, led to a sharp decline in the benchmark indices.

The Sensex fell 652.58 points, or 0.80%, to 80,983.33, while the Nifty 50 dropped 196.10 points, or 0.79%, to 24,771.65. The financial sector was particularly affected, with HDFC Bank and ICICI Bank leading the losses. Other notable decliners included Sun Pharma, Tata Steel, and Bharat Electronics [1].

The U.S. Department of Homeland Security issued a draft notice on Monday detailing the procedures for implementing the new levies, which are set to take effect on Wednesday. The steep 50% tariffs would put Indian goods at a significant disadvantage against regional competitors such as Vietnam and Bangladesh [1].

The planned visit by U.S. trade negotiators to New Delhi, scheduled from August 25-29, has been called off, further dampening hopes for a resolution or postponement of the tariffs. The additional 25% tariff on Indian goods, already in effect, has been compounded by the new 50% levy, making the overall tariff rate one of the highest globally [1].

Market sentiment was weakened by the announcement, and despite strong domestic institutional buying, the market struggled to maintain its resilience. The resilience of the market, despite tepid earnings growth, has been attributed to sustained liquidity flows, which have prevented a significant correction [2].

Investors are now in a 'wait-and-watch' mode, focusing on the August 27 tariff deadline and the expected goods and services tax rationalization later in the month. The market's continued resilience, co-existing with sluggish earnings growth, has made India the most expensive market in the world, according to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments [2].

The Nifty's inability to close above the 25,000/25,033 region yesterday suggests that buyers are not keen on chasing prices higher, leaving room for potential dips. However, a direct fall below 24,740 would be required to initiate downside plays [2].

References:
[1] https://www.ainvest.com/news/indian-stock-market-plummets-imposes-tariffs-indian-goods-2508/
[2] https://m.economictimes.com/markets/stocks/news/sensex-tumbles-over-500-pts-nifty-below-24800-after-u-s-moves-to-levy-steep-tariffs/articleshow/123515750.cms