Nifty 50 Slips to ₹24,475 as RBI Holds Rates & US Tariffs Bite
On August 7, 2025, the Nifty 50 index slipped to around ₹24,475, marking its third consecutive day of decline. The market downturn has been driven by multiple factors, including US tariff hikes on Indian exports, a steady outflow of foreign investor capital, and the Reserve Bank of India's recent decision to hold the key repo rate unchanged. Despite a fundamentally strong economic backdrop, investor sentiment has remained weak and volatile.
Key Market Updates and RBI Policy
The Reserve Bank of India (RBI) kept its benchmark repo rate unchanged at 5.50% in its August 6 policy meeting. This pause comes after a 100 basis point rate cut earlier this year. The RBI maintained a “neutral” policy stance and emphasized caution due to global trade tensions and geopolitical instability. Although consumer inflation has cooled significantly—dropping to a six-year low of 2.10% in June—the central bank chose to keep rates steady to gauge the effects of external risks.
The RBI retained its GDP growth forecast for the 2025–26 financial year at 6.5%, citing resilient domestic demand, improving rural consumption, and steady services performance. However, concerns about global headwinds, especially in the wake of new US tariffs, remain prominent.
US Tariffs Shake Investor Confidence
One of the biggest triggers for the recent market fall is US President Donald Trump’s announcement doubling tariffs on Indian exports. The total levy on select sectors like textiles, chemicals, gems, and leather now stands at 50%. This has raised fears about India’s export competitiveness, especially in labour-intensive sectors.
Market analysts suggest that if these tariffs are not withdrawn by the end of Q3, they could shave off as much as 0.4% from India’s overall GDP growth for the year. The news immediately impacted market confidence, leading to sharp declines in export-linked stocks and broader indices.
Sector-Wise Impact and Market Breadth
The damage was widespread. Nifty sectoral indices showed that nearly 14 out of 16 sectors ended in the red. Export-oriented industries such as IT, pharma, and textiles were hit the hardest. Mid-cap and small-cap stocks also declined by around 0.3–0.4%. Financials and banks were under pressure as fears of sustained FPI withdrawals loomed.
Analysts expect more short-term volatility in sectors heavily dependent on exports. Some sectors like telecom and infrastructure, however, are still seeing selective buying due to strong domestic demand.
Foreign Portfolio Outflows and Currency Pressure
Foreign Portfolio Investors (FPIs) continued to pull out funds from Indian equities. In early August alone, nearly ₹900 crore was withdrawn, adding to the ₹2,000 crore outflow in July. For the calendar year 2025, total FPI outflows from equities have already crossed $9.2 billion.
The Indian rupee has also been under pressure, recently crossing the ₹87.65 mark against the US dollar. Dollar demand from oil importers and the general risk-off sentiment have added to the currency’s woes. The RBI has been active in intervening in the forex market to prevent excess volatility.
Technical Patterns and Investor Outlook
Technically, the Nifty breached its immediate support zone between ₹24,550 and ₹24,600, signaling weakness. Chart analysts believe a trend reversal may occur mid-August, around August 8–10, if global cues turn favorable. Until then, volatility may persist.
Market sentiment remains fragile, and any escalation in US–India trade tension could drive the index further down. On the flip side, clarity on the tariff issue or improved earnings in Q2 results could stabilize the market quickly.
RBI’s Tone and Expert Reactions
RBI Governor Sanjay Malhotra stated that while India’s macro fundamentals are intact, risks from global trade disruptions warrant caution. The central bank’s decision to pause rate cuts reflects a desire to monitor inflation and geopolitical developments before making further moves.
Bond yields edged higher post-policy, as investors were expecting a slightly dovish tone. The central bank also stressed the importance of sustaining price stability before considering more easing.
Key Numbers and Market Snapshot (as of August 7, 2025):
- Nifty 50 Index: ~₹24,475
- Repo Rate: 5.50% (unchanged)
- CPI Inflation (June): 2.10%
- GDP Growth Projection: 6.5%
- FPI Outflows in 2025: ~$9.2 billion
- Rupee vs Dollar: ₹87.65
Investor Strategy Going Forward
Here are a few steps investors can consider:
- Closely track any diplomatic developments between India and the US regarding trade.
- Stick to fundamentally strong stocks in domestic demand-driven sectors like telecom, infrastructure, and FMCG.
- Monitor technical levels around ₹24,550–₹24,600 on Nifty as resistance for short-term trading cues.
- Diversify investments across mutual funds and ETFs to reduce exposure to FPI-led volatility.
Final Thoughts
The Nifty's current weakness is a result of complex global and domestic factors. While US tariffs are an immediate cause of concern, India’s core economic story remains strong. The RBI’s cautious policy stance indicates a wait-and-watch approach until there’s more clarity on inflation and global trade.
Market watchers believe the situation may improve post mid-August, particularly if diplomatic solutions are found regarding the tariff dispute. For now, investors should focus on quality, stay diversified, and avoid panic selling during this phase of heightened uncertainty.
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