Indian equities experienced a downturn on Friday, August 22, 2025, as investors engaged in profit booking, ending a six-day rally. The decline was further fueled by concerns surrounding impending US tariffs and mixed global cues.
The Sensex crashed by 694 points, a 0.85% drop, closing at 81,306.85. Similarly, the Nifty 50 settled with a loss of 214 points, also a 0.85% decrease, ending at 24,870.10. While the mid- and small-cap segments also experienced losses, they outperformed the broader market, with the BSE Midcap and Smallcap indices closing 0.23% and 0.35% lower, respectively.
Several factors contributed to the market's decline. After a strong buying spree that saw the Sensex gain approximately 1,800 points over six consecutive sessions, investors opted to book profits. This profit-taking was exacerbated by uncertainty surrounding potential US tariffs. The market is also worried about the looming risk of US tariffs. The secondary 25% tariffs are expected to come into effect from August 27, potentially bringing the total tariffs on Indian goods to 50%. It is estimated that almost $50 billion worth of Indian goods will be affected once the 50% US tariff comes into effect.
Caution prevailed as investors awaited a speech from US Federal Reserve Chair Jerome Powell at the Jackson Hole symposium. Investors are keenly awaiting clarity on potential US interest rate cuts.
Adding to the negative sentiment were escalating tensions between Russia and Ukraine and allegations from the White House Trade Advisor that India was "perpetuating" the Ukraine war by purchasing discounted Russian crude oil. These factors created a fragile market sentiment, discouraging traders from taking aggressive positions.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted that the headwinds from US tariffs would likely constrain the market rally. He suggested that if the penal tariff of 25% takes effect on August 27, as appeared likely, the impact on India's growth would be more significant than the initially estimated 20 to 30 basis points.
Despite the day's losses, some analysts believe the long-term outlook for the Indian market remains positive. However, investors are currently booking profits due to tariff-related uncertainty and weak earnings.
