Sensex down by 1,000 points. FII selling, tariff troubles key factors

Mumbai: Another day, another dip—Dalal Street continues to grapple with rising uncertainty due to a mix of global and domestic factors.

The S&P BSE Sensex slipped below 77,000 after falling over 1,000 points during intraday trade, while the NSE Nifty50 also tumbled sharply.

At 1:12 pm, the Sensex was down 956.92 points to 76,354.88, and the Nifty fell 294 points to 23,087.60. Most broader market indices were also in the red as volatility spiked sharply.

A steep drop in high-weightage indices like Nifty Bank, Nifty Financial Services, and Nifty IT indicates strong selling pressure in domestic markets. But what’s behind the continued market slide?

FII SELLING PERSISTS

One of the biggest reasons for the market’s weakness is the persistent selling by foreign institutional investors (FIIs), which shows no signs of slowing down.

This sustained selling has dampened sentiment, and a BNP Paribas Exane report warned that it could impact market stability.

“While India’s dependence on FII inflows has reduced due to strong domestic flows, FIIs still hold around $800 billion in Indian equities, and their continued selling remains a risk for the market,” the report stated.

TARIFF TROUBLES

Another key factor driving FII outflows is concerns over Donald Trump’s policy moves, particularly tariffs.

His latest action has overshadowed the recent consumption boost from the Union Budget 2025 and the RBI’s repo rate cut.

Trump has significantly increased tariffs on steel and aluminium imports, revoking exemptions and duty-free quotas for major suppliers like Canada, Mexico, and Brazil.

“Trump’s decision to impose 25% tariffs on steel and aluminium will impact countries like Mexico, Brazil, South Korea, and Vietnam more. Metal prices will remain soft for long,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Fresh tariffs on steel could also impact India due to concerns over dumping, leading to a sharp decline in metal stocks.

AUTO, REALTY, AND PHARMA STOCKS UNDER PRESSURE

A broad-based decline in auto, realty, and pharma stocks also weighed on the markets, mainly due to modest Q3 earnings and weaker guidance for the coming year.

Heavyweight banking, financial services and information technology stocks also declined due to possible panic-selling by investors, especially in small-cap and mid-cap stocks.

“The significant trend in the ongoing bearish phase of the market is the outperformance of largecaps over the broader market. While the Nifty Midcap and Smallcap indices are down 8.6% and 11.3% respectively YTD, the Nifty is down only 1.52%. This outperformance is likely to continue, going forward,” said Vijayakumar.