Mumbai, July 2, 2025 – Indian equity benchmarks erased early gains and slipped sharply into negative territory on Wednesday, as investor anxiety grew over the unresolved bilateral trade pact between India and the United States ahead of the July 9 deadline. The BSE Sensex, which had opened on a positive note and touched 83,933.85 in morning trade, reversed course and plunged over 500 points intraday to touch a low of 83,257.21. Similarly, the NSE Nifty declined below the psychologically crucial 25,400 mark, trading at 25,408.40 around 1:30 p.m., after peaking at 25,608.10 in early hours. The downturn was triggered by remarks from U.S. President Donald Trump, who ruled out any extension of the July 9 deadline for imposing higher tariffs on trading partners, intensifying uncertainty around the India-US agreement. Market participants viewed the lack of clarity as a key geopolitical risk, leading to a sharp selloff in heavyweight financial and auto stocks.
Highlights
Sensex dropped over 500 points from early highs; Nifty fell below 25,400.
U.S. President Trump confirmed no delay in new tariff deadlines.
Trade deal uncertainty triggered heavy intraday volatility.
Financial and auto sectors bore the brunt of the selloff.
Also Read : Early Gains Erased as Market Sentiment Dips on Mixed Global Cues
FII Outflows Add Pressure as Global Confidence Wanes
Foreign Institutional Investors (FIIs) continued to offload Indian equities for a second consecutive session, selling shares worth ₹1,970.14 crore on Tuesday, according to exchange data. The sustained FII outflows are seen as a signal of eroding global investor confidence amid escalating macroeconomic risks, including policy unpredictability from major central banks and mounting trade uncertainties. While domestic mutual funds have attempted to cushion the blow through retail-driven inflows, the intensity of FII selling—particularly in blue-chip names—has overwhelmed buying support. This sharp reversal in FII activity has disproportionately impacted large-cap stocks and banking counters, deepening the market slide and amplifying concerns around foreign capital stability.
Highlights
FIIs sold equities worth ₹1,970.14 crore on Tuesday.
Persistent outflows raise concerns over global investor sentiment.
Domestic buying insufficient to offset large-cap liquidation.
Capital flight has disproportionately hit financial stocks.
Powell’s Ambiguity on Rate Cuts Rattles Global Equities
Adding to the market’s unease, U.S. Federal Reserve Chairman Jerome Powell refrained from providing clear guidance on a potential rate cut during his speech at a monetary policy forum in Portugal. Instead, Powell reiterated the Fed’s “meeting-by-meeting” approach, citing economic data dependence without offering clarity on July’s outcome. Global equity markets responded with caution, and Indian stocks mirrored this subdued sentiment. Investors were hoping for dovish reassurance amid sluggish global growth, but Powell’s cautious language left markets without a definitive direction. In the absence of clear signals from the world’s most influential central bank, traders globally turned risk-averse, leading to a flight from emerging market assets, including Indian equities.
Highlights
Fed Chair Powell offered no clarity on July rate cuts.
“Meeting-by-meeting” stance increased global investor uncertainty.
Global markets turned defensive; India mirrored sentiment.
Lack of monetary direction hit foreign investor appetite.
Rupee Weakness and Oil Prices Stir Inflationary Fears
The Indian rupee opened 4 paise lower at 85.63 against the U.S. dollar, raising fresh concerns over imported inflation and its potential impact on domestic purchasing power. A depreciating currency, particularly in the context of unresolved trade tensions, erodes investor confidence in macroeconomic stability. Simultaneously, Brent crude oil prices edged up by 0.06% to $67.15 per barrel, exerting dual pressure on India’s import bill and fiscal outlook. With the country importing nearly 85% of its oil needs, even marginal price increases elevate inflation risks and could prompt monetary policy caution from the RBI. The combination of a weak rupee and higher crude reinforces fears of cost-push inflation, leading to a bearish tilt in investor sentiment.
Highlights
Rupee depreciated to 85.63/USD, spurring macroeconomic caution.
Brent crude rose to $67.15 per barrel, adding to cost pressures.
Weak currency and high oil imports spark inflation concerns.
Market wary of potential monetary policy implications from RBI.
Broader Asia-Pacific Markets Show Fragmented Trends
Global cues remained mixed, further muddying investor conviction. While key Asian indices such as Japan’s Nikkei, South Korea’s Kospi, and China’s Shanghai Composite traded in the red, Hong Kong’s Hang Seng defied regional weakness and posted intraday gains. Meanwhile, U.S. markets closed with a lack of direction overnight, offering little guidance to Indian equities. Analysts noted that fragmented global signals are creating a volatile backdrop, especially for emerging market portfolios. In the current environment, every macroeconomic data point—whether inflation reports, central bank speeches, or geopolitical developments—is being hyper-analyzed, leading to short-termism in investor behavior and increased day-to-day market swings.
Highlights
Asian markets mostly declined; only Hang Seng traded higher.
U.S. indices ended mixed, providing no strong overnight cues.
Global investor sentiment remains fragmented and cautious.
Heightened sensitivity to macro news drives intraday volatility.
