Market's 5-Day Slide: Is the US Tariff Verdict the Real Catalyst?

The market's five-day slide is now a clear event-driven selloff, with the primary trigger being a pending legal verdict. Both the Sensex and the Nifty 50 have fallen for five consecutive sessions, marking their worst weekly performance since September. The Sensex has shed 2,359.73 points over that period, while the Nifty has declined by over 2.5%. This sustained pressure is directly linked to the imminent US Supreme Court decision on the legality of President Trump's tariffs.

The court is expected to deliver its opinion imminently, with legal observers noting that the justices are in session for a non-argument day that could become an opinion day. This specific catalyst has created palpable nervousness, as reflected in the India VIX surging over 3% on Friday. The market is pricing in heightened volatility around this single event, which could have a major impact on India-US trade relations and domestic sentiment.

The stakes are high. If the court rules the tariffs illegal, the US government could be forced to refund nearly $150 billion to importers, a decision that would significantly alter the global trade landscape. For India, which already faces US tariffs of around 50% due to its purchases of Russian crude, the outcome adds a critical layer of uncertainty. This legal overhang, combined with stalled trade deal talks, has kept investors cautious and the indices under pressure.

The Mechanics: How the Verdict Could Change the Math

The Supreme Court's verdict isn't just a legal formality; it's a direct lever on India's trade and energy costs. The immediate financial implication hinges on a new bill that has already received President Trump's approval. This legislation, aimed at punishing nations that buy Russian oil, could trigger a 500% tariff on goods from any country that "knowingly engages in the exchange" of Russian petroleum products. For India, which has already faced a 50% tariff on its exports due to its energy purchases, a ruling that upholds such punitive measures would be a severe blow to its trade balance and energy bill.

The diplomatic friction adds another layer of pressure. US Commerce Secretary Howard Lutnick recently claimed that trade talks stalled because Prime Minister Modi did not call President Trump, a remark India has pushed back against. This exchange highlights the fragile state of bilateral relations, making the legal outcome even more critical. If the court validates the administration's authority to impose these tariffs, it could freeze the stalled trade deal and further isolate India on the global stage.

Compounding this external pressure is persistent capital flight. Foreign institutional investors have been net sellers for four straight sessions, with a Rs 3,367 crore outflow on Thursday. This steady exit intensifies the market's weakness, deepening the selloff as the legal overhang grows. The verdict, therefore, sits atop a setup where trade policy, diplomatic tensions, and capital flows are all converging to create a high-risk environment for Indian equities.

The Setup: Technical Breakdown and Near-Term Scenarios

The market's technical picture has now broken down decisively, turning a sentiment-driven selloff into a clear event-driven breakdown. The Nifty 50 has fallen below its 50-day moving average, a key short-term support level, while the Nifty Bank index has slipped under its 20-day exponential moving average. These breaches signal a loss of near-term momentum and confirm the bearish shift in trader positioning. The broader market is following suit, with the Nifty Midcap 100 and Smallcap 250 indices down 0.88% and 1.7% respectively on Friday.

This breakdown sets a clear downside path. Technical analysts project a move toward key support zones if sentiment remains weak. The Nifty could test levels between 25,750 and 25,700, while the Sensex faces a similar range from 84,000 to 83,700. These are the immediate targets for a continued slide, with the market now operating in a defined risk zone.

The immediate risk/reward setup is binary and hinges entirely on the Supreme Court verdict. A favorable ruling that upholds the tariffs would likely deepen the slide, triggering a wave of selling as the worst-case trade scenario materializes. The technical break below key moving averages would then likely accelerate toward those projected downside targets. Conversely, an adverse ruling that finds the tariffs illegal could spark a sharp reversal. The sudden removal of the $150 billion overhang and the potential for a thaw in US-India relations would provide a powerful catalyst for a relief rally, potentially reclaiming the broken moving averages and pushing indices higher.

For now, the technicals are clear: the market is in a breakdown mode, with the event verdict acting as the sole lever that can change the direction of the slide.