Sensex tanks 700 points: 3 reasons behind the market fall

While India has signed a trade agreement with the UK, D-Street's focus remains firmly on the prospective trade deal between New Delhi and Washington.

Stock market today: Benchmark equity indices fell sharply on Friday as uncertainty over the prospective India-US trade deal, ahead of the August 1 deadline, weighed down the overall market sentiment. 

  At 11:30 AM, BSE Sensex was trading at 81,692.58, down by 491 points or 0.6 per cent. The index hit an intraday low of 81,405.83, down by 778 points.

 

NSE Nifty, followed suit and was trading below 24,900 level, down by 169 points or 0.68 per cent. The index hit an intraday low of 24,806.35.

 

From the Sensex pack, except Bharti Airtel, Sun Pharma and Tata Consultancy Service (TCS), all stocks were trading in red. Bajaj Finance, Bajaj Finserv, Eternal (Zomato), PowerGrid and Infosys were among the top laggards. The fall was steeper in broader markers. The Nifty midcap 100 was down by 1.12 per cent, trading at 58,303.25. Nifty smallcap witnessed a similar trend and was down by 1.53 per cent, quoting 18,400.6. 

 

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Sectorally, Nifty Energy was among the worst-performing indices, trading at 35,535, down by 1.42 per cent. Nifty Auto also traded lower, quoting 23,768, down by 1.32 per cent. 

Nifty Media experienced the steepest decline of 1.91 per cent, trading at 1,681.6 level. On the flip side, Nifty Pharma was trading in green, up by 0.22 per cent, trading at 22,590.3 levels.

Uncertainty over India-US trade deal

While India has signed a free trade agreement with the UK, D-Street's focus remains firmly on the prospective trade deal between New Delhi and Washington. For now, speculation continues, but no concrete development has emerged so far, ahead of the August 1 tariff deadline, which is eventually weighing down the overall market sentiment.

 

With the deadline now just a week away, investor nerves are on edge as the market awaits a deal that might help avert the looming 26 per cent tariffs. Any delay or lack of clarity can trigger near-term volatility in the market. On Friday, D-street's fear gauge was already down by over 6 per cent, signalling the subdued sentiment. 

FMCG, IT stocks down

While the IT sector had already dampened market sentiment after key players reported underwhelming quarterly results, the FMCG sector added further pressure. Industry heavyweight Nestle India disappointed investors by reporting a 13 per cent year-on-year (Y-o-Y) decline in consolidated net profit to ₹646.6 crore, down from ₹746.6 crore. The broader Nifty FMCG index slipped to an intraday low of 54,645, down 0.6 per cent. Nestle India shares were trading at ₹2,285, down by 1.6 per cent.

 

In the previous session, IT stocks showed similar weakness, with the Nifty IT index falling over 2 per cent. Even Mphasis shares declined, despite the company reporting a rise in Q1FY26 profit after tax (PAT) to ₹441.7 crore, up from ₹404.5 crore in the corresponding quarter last year. Shares of the midcap IT company were trading at ₹2,637.5, down by 0.6 per cent.  Meanwhile, Bajaj Finance's recent earnings also dragged benchmarks, despite reporting a 22 per cent surge in consolidated net profit to ₹4,765 crore in Q1FY26. Shares of the company were down by over 4.84 per cent, trading at ₹912.5 per share.

 

"IT stocks witnessed sharp decline, after mid-cap players Coforge and Persistent reported weaker than expected quarterly results. Additionally, lingering uncertainty around the India-US trade deal further weighed on the sector," said Siddhartha Khemka, head-research, wealth management, Motilal Oswal Financial Services.

FIIs on selling spree

Foreign investors continue to remain net sellers in Indian equities. Analysts believe that, more than muted earnings, it is the stretched valuations that have prompted this shift, from four consecutive months of net buying to selling in July. Indian markets are currently trading at a premium compared to peer markets, making them less attractive in the short term. It is also worth mentioning that the selloff has been more pronounced in the smallcap segment, where valuations have once again run high. D-street players are expecting this trend to continue in the near term.

 

"The near-term market construct has turned weak. Sustained FII selling of Rs 11572 crores in the last four trading days will weigh on the market. The weakness in the broader market, particularly in smallcaps, might continue since valuations had turned excessive and difficult to justify," said VK Vijayakumar, chief investment strategist at Geojit Investments.