India’s benchmark indices tumbled on Friday after seeing initial gains as global uncertainties and persistent selling by global funds deepened the ongoing correction.
Indian benchmark indices — NSE Nifty 50 and 30-stock Sensex — fell as much as 1.1% and 0.92%, respectively, in Friday’s trade.
Uncertainties related to US President Donald Trump’s new reciprocal tariffs spooked traders in some sectors. Nifty Pharma, media and energy sectors fell the most.
The broader market tumbled over more than the benchmark indices, with fund managers expecting further downside for these stocks. The mid-cap index was down 3.03% while the small-cap index slipped by 3.84%.
Nifty Smallcap 250 and Nifty Midcap 150 — fell as much as 22% and 18.4%, respectively, from their previous peak last year.
Despite multiple positive developments, the Indian equity market has yet to see a significant rally, according to Jefferies’ latest India strategy report. Pro-growth commentary from the Reserve Bank of India, no negative impacts from the new income tax bill and strong mutual fund inflows have not been sufficient to drive a market rally.
FII Selling Persists
Foreign institutional investors’ selling in the cash market topped Rs 1.1 lakh crore in 2025, according to the data from NSE, taking the selloff to worst in any year. Meanwhile, domestic investors bought Rs 1.08 crore in the cash market this year.
Foreign portfolio investors stayed net sellers of Indian equities for the seventh straight session on Thursday as they offloaded stocks worth approximately Rs 2,789.9 crore.
Foreign outflows are already at levels seen in previous intervals of FII selling, but the 2021-2022 period shows they have room to sell more, HSBC said in a report.
Trump Uncertainties
US President Donald Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners, which could take effect from April this year. Reciprocal tariffs could affect nearly every country, with India, Japan, and the European Union being hit the most.
Trump earlier unveiled plans to impose a 25% tariff on all imports of steel and aluminum. He said the tariffs would apply to import of the metals from all countries.
This comes after a series of threats against Mexico, Canada and China. While tariffs on Mexico and Canada are on hold, China’s retaliatory tariffs on US goods have taken effect.
Muted Earnings
Bank of America expects Indian companies’ earnings growth to slow down going ahead, after the earnings tracked by the brokerage were largely in line in the third quarter, led by healthcare.
Starting in the fourth quarter of the current fiscal, Nifty 50 and NSE 200 companies could see stable margins and execution pickup, analysts at BofA said in a note. “But select capex-oriented like steel and cement could limit Nifty earnings growth to 13-14%.”
In a cyclical downturn, BofA continues to see current valuations as expensive. However, there are pockets of opportunity across consumption-focused and defensive sectors like staples, autos, financials, telecom and healthcare as they could benefit from consumption stimulus tailwinds, it said.
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