July 31, 2025: Nifty50 and BSE Sensex, the Indian equity benchmark indices, opened at a low Thursday after US President Trump announced a 25% tariff plus additional penalty on India. While Nifty50 went below 24,700, BSE Sensex was down 600 points intraday.
Market indices, on the other hand, began to recover later in the day as the trend reversed. The Nifty50 was up 62.70 points at 24,917.75 as of 1:28 pm, while the Sensex was up 172.51 points. The 25% tariffs on Indian exports to the United States, which took effect on August 1, contributed in part to the market volatility. Experts in the market consider Trump's "additional; penalty" for India's purchases of Russian arms and oil to be the greatest threat. Companies listed on BSE had experienced a collective reduction in market value soon after opening with total market capitalisation decreasing by Rs 5.5 lakh crore to Rs 453.35 lakh crore.

What caused the stock market to decline today? Top reasons

1) US 25% tariff
India would be significantly affected by the proposed 25% tariff in comparison to other trading partners. Experts in the field say that, should the tariffs go into effect, they would have a significant impact on India's primary exports to the United States, particularly in the fields of automobile parts, pharmaceuticals, and textiles. The US administration indicated additional sanctions against India, referencing trade disparities and India's association with the BRICS group, which it considers opposed to US interests.

"The 25% tariff imposed on India and the unspecified penalty imposed by Russia for energy and defense-related purchases are extremely negative news for Indian exports and, as a result, the short-term growth prospects of the Indian economy." Since trade negotiations with India are continuing, perhaps, the 25 % tariff may come down eventually. But certainly, there is a short-term hit to Indian exports and GDP growth. This short-term hit will reflect in the stock market, too, in the short-term," said Dr. Geojit Investments' Chief Investment Strategist is VK Vijayakumar.

2) Federal Reserve's Latest Position
Market confidence declined following the US Federal Reserve's decision to maintain current interest rates at their fifth consecutive meeting. In spite of the fact that this was anticipated, Chairman Powell of the Federal Reserve expressed hesitation regarding a September rate adjustment, noting that it was premature to make such a decision. Even though the Federal Reserve's current position is somewhat restrictive, economic expansion has not yet been impacted, extending the time frame for policy changes.
3) A rise in the cost of crude oil On Thursday, traders evaluated potential supply constraints in light of US President Donald Trump's tariff announcements regarding the situation in Ukraine. This resulted in oil prices stabilizing. However, price gains were constrained by an unexpected rise in US crude stocks. While WTI remained below $70, Brent crude remained close to $73 per barrel. The two key benchmarks had increased by 1% during the previous session, yet current geopolitical uncertainty and conflicting inventory reports maintained market caution.

4) Continued FII selling adds pressure
Over the course of eight recent trading sessions, foreign institutional investors (FIIs) have consistently remained net sellers, withdrawing approximately Rs 25,000 crore from Indian stocks.

Market experts indicate US President Donald Trump's suggested 25% tariff on Indian imports could negatively influence FII outlook. According to Nuvama, the US may have the greatest impact on industries like pharmaceuticals, auto ancillaries, select industrials, cables and wires, and tiles.