Sensex settles 700 pts lower, Nifty below 24,900: Tariff jitters among key factors behind market decline

Sensex, Nifty see profit-booking in August 22 trade. 

The benchmark equity indices Sensex and Nifty traded lower on Friday, snapping a six-day winning streak, as broad-based selling gathered pace amid investor caution prevailed ahead of US Federal Reserve Chair Jerome Powell’s awaited speech at the Jackson Hole symposium.

Sensex dropped 693.86 points or 0.85 percent to 81,306.85, while the broader Nifty fell to 24,870.10, down 213.65 points or 0.85 percent.

Sector-wise, all major indices traded in the red except pharma and consumer durables.

Financials and the banking index fell up to 1 percent. IT shares, which had recorded a 3 percent rally in the previous three sessions, also fell up to one percent ahead of Powell’s remarks later in the day.

Financials, IT, and select heavyweights led losses, with Hero MotoCorp, HCL Technologies, HDFC Bank, Grasim Industries and Asian Paints among the major laggards, declining up to 2 percent intraday.

Bharat Electronics, Bajaj Finance, Mahindra & Mahindra, Sun Pharmaceutical Industries and Trent were the major gainers.

Key factors weighing on the market:

1) Profit-booking: Profit-booking emerged after a six-day rally, with broad-based selling led by financials and IT stocks as major sectoral indices turned negative, barring pharma and consumer durables. There was selling in frontline banking stocks, including HDFC and ICICI Bank. Investors booked profits with recent gains after GST reforms announcement and an S&P sovereign rating upgrade.

2) Jitters ahead of Powell’s Jackson Hole speech: The investors remained cautious, as Powell's commentary is widely expected to shape US monetary policy in upcoming Fed meet in September. "Market weakness stemmed from mounting uncertainty ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech on Friday, where his remarks could significantly influence September’s monetary policy direction," said Devarsh Vakil, Head of Prime Research, HDFC Securities.

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3) India Vix rises: The benchmark India Vix, a measure of market volatility, rose nearly 2 percent to 11.59 levels, signalling a pick-up in risk aversion. An uptick in VIX typically prompts traders to trim positions as expectations of volatility increase.

4) Additional tariff deadline approaches: Concerns over impending additional 25 percent US tariffs, effective August 27, further unsettled sentiment.

"The headwinds for the market from Trump tariffs will weigh on markets, constraining the rally of the last 6 days. If the penal tariff of 25% kicks in on August, the impact on India’s growth may be higher than the 20–30 basis points estimated with reciprocal tariffs," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

5) Rupee declines: The rupee weakened by 11 paise to 87.36 against the US dollar in early trade, amid rising dollar demand. However, foreign portfolio inflows and easing crude oil prices prevented further losses, traders noted.

6) Peter Navarro comments weigh on sentiments: White House trade adviser Peter Navarro has once again accused India of “perpetuating” the Ukraine war, alleging that New Delhi is acting as a “laundromat for the Kremlin” and warned that the secondary tariffs against Indian goods will kick in from August 27.

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7) Brent crude rises: Oil prices increased on Friday, with Brent Crude futures rising nearly 0.3 percent to stand at around $67.85 per barrel. WTI Crude futures meanwhile rose 0.33 percent to hover near the $64 per barrel-mark. This comes as Russia-Ukraine war continues to escalate, with hopes of US-brokered peace talks seeming to fade.

Technical outlook

Anand James, Chief Market Strategist, Geojit Investments Limited, said recent upswings softened after nearing key resistance at 25,153. "Directional indicators are yet to show enough momentum to continue pushing higher. But besides volatility expectations, the setup does not indicate a collapse either. For now, 25,033–24,977 may act as immediate downside markers," he said.

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