After posting gains earlier in the week, Indian equity markets reversed course on Thursday, July 24, with benchmark indices Sensex and Nifty 50 witnessing sharp losses during intraday trade.
The Sensex plunged nearly 700 points, touching a low of 82,047, while the Nifty 50 declined by 0.80% to an intraday low of 25,018.70. By 12:35 PM, the Sensex had trimmed some losses but was still down by 502 points (0.61%) at 82,225, and the Nifty was 136 points (0.54%) lower at 25,084.
Broader markets mirrored the weakness, with both the BSE Midcap and Smallcap indices falling by around 0.5%.
What’s Behind the Market Decline?
Experts have identified five key reasons contributing to the ongoing market downturn:
1. Tepid Q1 Earnings Performance
Corporate earnings for Q1 FY26 have been underwhelming, failing to meet investor expectations. Analysts believe this mixed performance, coupled with slowing GDP growth and low inflation, is dampening confidence in a robust earnings recovery.
“We need a material uptick in income growth to see broad-based consumption recovery,” said Krishnan V R, Chief of Quantitative Research at Marcellus.
2. Delay in India-US Trade Agreement
The absence of a conclusive trade deal between India and the United States is also weighing on sentiment. With the US already securing deals with other countries like Japan, the prolonged India-US trade uncertainty poses risks to export competitiveness and strategic cooperation, especially in tech and defence.
“Prolonged delays carry risks of retaliatory tariffs and missed opportunities,” warned Sankhanath Bandyopadhyay, Economist at Infomerics.
3. Foreign Capital Outflows
There has been heavy selling by foreign portfolio investors (FPIs), who have withdrawn nearly ₹26,395 crore from Indian equities in July amid concerns over stretched valuations. While FPIs are still participating in IPOs and primary markets, they are exiting the secondary market aggressively.
“FIIs are turning sellers in the cash segment due to relatively cheaper valuations in other global markets,” said VK Vijayakumar, Chief Investment Strategist, Geojit.
4. Lack of Fresh Market Triggers
The markets are currently devoid of strong, fresh triggers. Investors are choosing to book profits on rallies, with the market reacting more to stock-specific news and tariff developments, rather than broad economic momentum.
While long-term sentiment remains broadly positive, near-term trends are being dictated by news flows and Q1 earnings volatility.
5. Technical Weakness
From a technical standpoint, the Nifty 50 is facing resistance at 25,340, and unless it closes decisively above this level, downside risks remain.
“A fall to 24,800–24,900 remains a real possibility unless a strong breakout occurs,” noted Akshay Chinchalkar, Head of Research at Axis Securities.
Conclusion
While the long-term market outlook remains optimistic, short-term pressures from earnings disappointments, geopolitical uncertainties, and technical resistance levels are driving volatility. Analysts suggest investors tread cautiously until stronger domestic and global cues emerge to support a sustainable rally.
