Sensex ends 572 pts lower, Nifty below 24,700. Here are 5 reasons why the Indian stock market fell

Economic Times

2 days ago

ET Online Sensex and Nifty fell sharply as poor earnings, IT job cuts, and stalled US trade talks sparked investor concerns and triggered foreign capital outflows.
Indian benchmark indices ended in the red on Monday as weak quarterly earnings, stalled trade negotiations with the U.S., fresh layoffs in the IT sector, and continued foreign investor outflows weighed heavily on market sentiment.The 30-stock Sensex index fell 572.07 points or 0.7% to close at 80,891.02, while the Nifty had dropped 156.10 points or 0.63% to end at 24,680.90. Both the benchmarks have logged four consecutive weekly losses.Mid-cap and small-cap indices also mirrored the broader decline, falling 0.8% and 1.3%, respectively, underlining the breadth of weakness across segments.The market capitalization of all listed companies on the BSE shrank by Rs 4.88 lakh crore to Rs 447.85 lakh crore.
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."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.
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.
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.
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 ended 0.7% lower, deepening losses in what has become 2025's worst-performing sector, down 24% from its peak. TCS shares closed 1.6% lower at Rs 3,085.80 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, Infosys, HCL Tech and Tech Mahindra shedding between 0.2% and 1.6%."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. "Once again, bears ruled the day as the Nifty fell below 24,700 amid rising weakness in the market," said Rupak De, Senior Technical Analyst at LKP Securities, adding that "during the session, the index faced resistance around the 50-EMA and remained below it until the close." The RSI continues to support the bears with its negative crossover, De said, adding that "in the short term, the index may remain under pressure, with a possibility of slipping towards 24,550. On the higher end, resistance is seen at 24,800 and 24,950."
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