Sensex falls 700 pts from day's peak, Nifty below 24,700. Here are 5 reasons why the Indian stock market is in a downtrend
ADVERTISEMENT At 2:14 PM, the 3-stock Sensex index was down 575.01 points to 80,901.30, while the Nifty had dropped 156.05 points to 24,680.95. Both the benchmarks have logged four consecutive weekly losses.
Mid-cap and small-cap indices also mirrored the broader decline, falling 1% and 1.1%, respectively, underlining the breadth of weakness across segments.
Negotiations between India and the United States remained deadlocked, particularly over tariff reductions on agriculture and dairy products, dampening hopes of an interim deal before U.S. President Donald Trump's August 1 deadline.In contrast, the U.S. and European Union struck a framework agreement over the weekend, easing broader trade war concerns and highlighting India's diplomatic lag.
ADVERTISEMENT "Negative news and triggers have pushed the Nifty to a one-month low, and market sentiments continue to be unfavourable. While trade deals with Japan and EU, thought to be difficult initially, have happened, the much expected India-US trade deal is even now hanging fire. This has impacted market sentiments," said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
ADVERTISEMENT Disappointing corporate earnings continued to weigh on sentiment, with Kotak Mahindra Bank plunging 7.8% to Rs 1,960.1 after reporting a decline in quarterly profit and deterioration in key metrics such as asset quality and margins. The stock was the worst performer on the Nifty 50 and led losses in the banking sector, dragging the Nifty Bank index down 1%.Kotak's quarterly gross non-performing assets rose to 1.48% of total loans from 1.39% a year earlier, while its net interest margin fell to 4.65% from 5.02%. The decline in profitability followed interest rate cuts by the Reserve Bank of India, which narrowed spreads as lending rates fell faster than deposit rates.
ADVERTISEMENT Earlier this month, Axis Bank had also reported underwhelming results, sparking renewed concerns around asset quality across the financial sector.'Q1 results... are not yet indicating any major positive surprises. Investors have to be cautious and stock-specific in this weak phase of the market. There is safety in largecaps banks like ICICI Bank and HDFC Bank which have come out with the best results in the segment with prospects of improvement going forward,' said Dr. Vijayakumar.
ADVERTISEMENT Shares of large-cap IT companies extended their decline after Tata Consultancy Services (TCS) said it would cut around 2% of its global workforce, about 12,000 employees, amid weak demand and structural realignment efforts. The Nifty IT index dropped 1.6%, deepening losses in what has become 2025's worst-performing sector, down 24% from its peak.TCS shares slid 1.7% to Rs 3,081.60 after the company stated, 'The deployment of some associates may no longer be feasible under current market conditions.' TCS clarified that the move was not AI-driven but stemmed from realignment needs.Peers followed suit, with Wipro dropping 3.5% to Rs 250.05, Infosys declining 2.2% to Rs 1,482.50, HCL Tech falling 1.1%, and Tech Mahindra shedding nearly 1%."The sharp cut in the IT index has been dragging the market down, and there is no respite in this in view of the 2% cut in its global workforce announced by TCS. However, midcap IT names hold promise in view of their strong growth prospects," said Dr. Vijayakumar.Jefferies warned of wider repercussions, noting: 'TCS' move to cut 2% of its workforce may lead to execution slippages in the near-term and higher attrition in the longer-run for the firm and reflects a weak demand environment for the sector.'The brokerage added that TCS's recent decisions, including the April wage hike deferral and the June policy restricting non-billable periods, signal a sustained focus on cost containment. 'The ongoing lay-offs will hurt employee morale and could potentially lead to execution slippages. In the longer run, such policies could drive a sharp rise in attrition, similar to what was seen at Cognizant during 2020–22.'Foreign Institutional Investors (FIIs) remained net sellers, offloading equities worth Rs 1,979 crore on July 25, marking their fifth straight session of withdrawals. In contrast, Domestic Institutional Investors (DIIs) bought equities worth Rs 2,138 crore."FII selling of Rs 13,552 crores in the cash market last week has added to the weakness in the market," noted Dr. Vijayakumar.From a technical standpoint, downside pressure remains intact with key support levels coming into view."The major supports are at 24,450 and 24,000, but we will begin the week expecting downsides to not extend beyond the 24,750–650 region. A swing higher is expected this week, but oscillator divergences seen in intraday periodicities that have signalled the same are yet to be visible in larger time frames," said Anand James, Chief Market Strategist, Geojit Investments.
"This gives room for downside momentum to prevail over for some more time. However, direct rise above 24,922 could initiate short covering. In such a scenario, 25,324 may be played for, even though 25,000 region may resist initially," said James.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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