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Market Slumps on U.S. Tariffs; IT Sector Shows Resilience

By Mandar in Indian Market Insights —

Indian Equity Market Overview

The Indian equity market experienced mixed performance across two consecutive trading days. On August 25, the market closed with moderate gains, while August 26 witnessed sharp declines due to external factors.

  • August 25: The Nifty neared 25,000, and the Sensex rose over 329 points. A strong IT sector rally supported the market's gains. Although Midcap and Smallcap indices ended flat. Positive technical signals emerged.
  • August 26: The market saw sharp declines reacted to the United States government's draft notice to impose tariffs up to 50% on Indian goods. The Sensex fell below 81,000, and Nifty dropped below 24,800.

Market Performance on August 25

The market's positive close on August 25 was driven by key factors.

  • IT Sector Dominance: The IT sector outperformed, with a 2.4% rise, major IT stocks like Infosys, TCS, HCL Technologies, and Wipro gained significantly.
  • Other Sector Performance: Indices like Realty and Metals showed modest gains. Healthcare and consumer staples saw weakness.
  • Key Gainers: IndusInd Bank performed well.
  • Technical Analysis: A bullish Harami candlestick pattern, supported by the 20- and 50-day exponential moving averages (DEMA) and a Relative Strength Index (RSI) above 50.

Market Downturn on August 26

The market faced a significant downturn on August 26 due to escalating US trade tariffs and other factors.

  • US Tariff Impact: The US government's draft notice to impose tariffs of up to 50% on Indian goods starting midnight significantly impacted investor sentiment.
  • Market Reaction: The Sensex fell over 600 points, and Nifty dropped below 24,800.
  • Underlying Issues: The tariffs target Indian exports related to Russian oil imports, increasing pressure on export-driven sectors. Foreign investor selling and currency volatility added to the negative sentiment.

Key Levels and Strategic Considerations for Investors

Investors should consider the following key levels and factors when making investment decisions.

  • Nifty:
    • Support level is at 24,850.
    • Resistance level is near 25,150.
  • Bank Nifty:
    • Key support is at 54,900.
    • Resistance is at 55,800.
  • Sector Focus:
    • Remain cautious on sectors exposed to U.S. tariffs.
    • IT sector is showing relative strength.
  • External Factors to Watch:
    • Monitor foreign institutional investor behavior.
    • Keep a close eye on currency fluctuations and global trade developments.

Investors are advised to balance technical signals with geopolitical and macroeconomic risks for strategic positioning in the near term.