The Nifty 50 Index (INDEXNSE: NIFTY_50) extended the downside on Thursday, closing at 24,500 points after dropping by 0.85% on the day. The performance is reflective of the uncertainty that has crept in the Indian economy as US 50% trade tariffs kicked in. Investors have been hoping for a potential upturn in September after a prolonged correction going back to late June. The Nifty 50’s performance was also seen in the benchmark Sensex Index’s 707 points decline, as key sectors including IT, pharmaceuticals and banking recorded negative returns.
Trade Tariffs Bite Off Nifty 50
Indian goods were previously subjected to a 25% trade tariff, but that has doubled effective August 27th. That puts $150 billion worth of trade in jeopardy, with goods including textile, jewelry, leather, chemicals affected. Analysts estimate that a prolonged 50% tariff regime could potentially shave off 0.5%-1% from India’s GDP growth estimate.
Meanwhile, Foreign Portfolio Investors have been shipping out their money in bulk, with August outflows exceeding ₹25,000 crore (approximately $30 billion). This will ultimately be felt by the Indian economy, and the resulting sentiment adds downward pressure to Nifty 50 Index.
On a positive note, domestic investors have increased their uptake of stock, with inflows worth about ₹7,000 crore ($843 million) helping to offset the outflows. Meanwhile, Prime Minister Narendra Modi has upped the tempo on his “buy India” campaign, calling for a higher self-reliance and indicating reluctance to cave in to pressure from the Donald Trump administration. Regardless of how the campaign turns out, the current market sentiment will likely continue weighing down on the Nifty 50 Index as long as the high trade tariffs remain in place.
Nifty 50 Index Forecast
The Nifty 50 Index has recently crossed below the 50-day Moving Average, signaling near-term bearishness. The downside will likely prevail if resistance persists at 24,600 points. With the sellers in control, the Index will likely have its primary support at 24,450 points mark. A stronger momentum will break below that level and potentially send the action lower to test 23,356.
Alternatively, breaking above 24,600 points will invite the buyers to take control. In that case, the upside momentum will likely meet primary resistance at 24,705. Clearing that level will signal a stronger momentum that will invalidate the downside narrative and potentially clear the path to test 24,795 points.
The Index is under pressure from a sour sentiment brought by 50% US trade tariffs against India, which kicked in on August 27.
The Index is primarily made up of IT, banking and pharmaceutical stocks, which account for more than 30% of the weight.
The Nifty 50 Index is a market cap-weighted index consisting of 50 of the largest companies traded at the NSE, with the component companies from 13 sectors of the Indian economy
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