Sensex Falls Over 800 Points: Trump Tariffs Cause Indian Market Collapse – Key Reasons Unravelled
August 28, 2025 – The Indian share market witnessed a huge fall today, with the BSE Sensex plummeting by over 800 points in the wake of rising trade tensions with the United States. The benchmark index fell to 80,786.54, a downslide of 849.37 points or 1.04% from its last close. This was a sell-off that erased substantial investor wealth, with the overall market cap down by a huge amount, placing it at about Rs 6 lakh crore in recent sessions.
NSE Nifty 50 also felt the impact of the volatility, breaking below the 24,800 level to settle at 24,712.05 – down 255.7 points or 1.02%.
The index opened at 24,899.50, hit a high of 24,919.65 during the day, and fell to a low of 24,689.60, showing a swing of more than 230 points. There was extremely weak market breadth with advances being dwarfed by declines. Of the Nifty 50 stocks, few managed to gain: Eicher Motors headed the pack with a 2.7% gain, followed by Hindustan Unilever at 2.32% and Maruti Suzuki at 1.81%. Contrarily, Sun Pharma fell 3.3%, Shriram Finance lost 4%, and other notable losers were Tata Steel (-2.9%) and Bajaj Finance (-2.7%). Auto and FMCG sectors remained relatively resilient, while financials, pharma, and metals came under severe selling pressure.
Why Is the Indian Stock Market Dropping? Main Reasons Elucidated
The main driver of the current market collapse was the imposition of retaliatory U.S. tariffs by President Donald Trump. Starting August 27, 2025, the U.S. raised the tariff on Indian exports by 25%, essentially doubling the tariff to 50% in most instances. This action was presented as a response to India’s continued importation of Russian oil during the ongoing Russia-Ukraine war and collapsed diplomatic negotiations. The tariffs have been compared to a “trade embargo” by analysts, who predicted that they would reduce exports from affected industries by 70%, potentially jeopardizing jobs and economic growth.
Segments likely to take the initial brunt are textiles, chemicals, seafood, gems and jewellery, and pharma. Shares such as Gokaldas Exports, Avanti Feeds, and SRF fell by as much as 5% as investors prepared for softer U.S. demand. The tariffs not only dent foreign investment worth billions but also put a strain on the U.S.-India relationship, leading to Prime Minister Narendra Modi driving the narrative of self-reliance.
Apart from the tariffs, a number of other reasons added to the woes of the market:
- Foreign Institutional Investor (FII) Selling: FIIs had their biggest sell-off after May, selling shares valued at Rs 6,517 crore, on account of tariff jitters and a stronger dollar. Domestic Institutional Investors (DIIs) responded with purchases of Rs 7,060 crore, but that wasn’t enough to stop the slide.
- Weak Global Cues: Unclear signals from Wall Street and Europe combined with geopolitical fears and surging oil prices fueled the bearishness. Depreciation of the rupee further dented investor confidence.
- Sector-Specific Pressures: Pharma shares plummeted as Trump promised to reduce U.S. drug prices, while export-oriented companies across the board struggled with the new tariffs.
Market analysts expect further volatility in the short term, with the Nifty threatening to test support levels of 24,035-24,778. The resistance lies at 24,866-25,123. Although the tariffs is a major test, India’s strong domestic economy and continuing reforms may act as a buffer. Investors should keep a watch on defensive stocks such as FMCG and keep an eye on future U.S.-India trade talks.
As the dust settles, the episode highlights the weaknesses of global trade dependencies. On that score, the market’s recovery is predicated on diplomatic solutions and robust corporate revenues for now.
FAQs on Sensex Fall Due to Trump Tariffs
Q1. Why did the Sensex fall by over 800 points today?
The Sensex plunged mainly due to the imposition of a 50% tariff by the U.S. on Indian exports, announced by President Donald Trump. This triggered fears of reduced trade, lower exports, and overall economic slowdown.
Q2. What are the key sectors impacted by the U.S. tariffs?
Textiles, chemicals, seafood, gems and jewellery, and pharmaceuticals are the worst hit as these are export-driven sectors with heavy reliance on U.S. demand.
Q3. How much market capitalization was lost due to this fall?
The Indian market lost nearly ₹6 lakh crore in investor wealth during this sharp decline.
Q4. Did the NSE Nifty also drop along with Sensex?
Yes. The NSE Nifty 50 fell below the 24,800 mark and closed at 24,712.05, a decline of 255.7 points or 1.02%.
Q5. Were there any stocks that gained despite the crash?
Yes. Eicher Motors (+2.7%), Hindustan Unilever (+2.32%), and Maruti Suzuki (+1.81%) ended in the green as auto and FMCG sectors showed resilience.
Q6. Which stocks saw the biggest losses today?
Sun Pharma (-3.3%), Shriram Finance (-4%), Tata Steel (-2.9%), and Bajaj Finance (-2.7%) were among the top losers.
Q7. How did Foreign Institutional Investors (FIIs) react to the news?
FIIs turned heavy sellers, offloading shares worth ₹6,517 crore, which contributed significantly to the market crash.
Q8. What role did Domestic Institutional Investors (DIIs) play?
DIIs attempted to counter the fall by purchasing shares worth ₹7,060 crore, but their efforts weren’t enough to stabilize the market.
Q9. How did global factors influence today’s fall?
Weak cues from global markets, geopolitical tensions, rising crude oil prices, and a depreciating rupee worsened investor sentiment.
Q10. How will the U.S. tariffs affect India’s economy in the short term?
Exports are expected to shrink by nearly 70% in the affected industries, which could result in job losses, reduced foreign investment, and slower GDP growth.
Q11. Why did the U.S. raise tariffs against India?
The U.S. cited India’s continued import of Russian oil during the ongoing Russia-Ukraine war as a reason for retaliation, following failed diplomatic negotiations.
Q12. What levels should investors watch for on the Nifty?
Market experts suggest support between 24,035–24,778 and resistance at 24,866–25,123.
Q13. How are pharma stocks particularly impacted?
Pharma companies took a hit as Trump pledged to cut U.S. drug prices, adding pressure to Indian exporters in the sector.
Q14. Is there any silver lining for investors amid the crash?
Yes. FMCG and auto sectors remained relatively strong, acting as defensive bets for investors.
Q15. What should investors do in such volatile times?
Experts recommend diversifying portfolios, focusing on defensive stocks like FMCG, and waiting for clarity on U.S.-India trade talks before making aggressive investments.
Q16. Could the market bounce back quickly?
The recovery depends on how U.S.-India trade negotiations evolve and whether domestic growth remains strong enough to offset external shocks.
Q17. How does this fall compare with earlier crashes in 2025?
This is the sharpest single-day fall since May 2025, largely due to a mix of global trade tensions and heavy FII outflows.
Q18. What is PM Modi’s response to the tariff crisis?
Prime Minister Narendra Modi has urged India to focus on self-reliance and reduce dependence on foreign trade shocks.
Q19. How much did the rupee depreciate during this period?
The rupee weakened further against the U.S. dollar, adding to investor worries and impacting import costs.
Q20. What lessons can investors learn from today’s market collapse?
The episode highlights the vulnerability of emerging markets like India to global trade wars, emphasizing the need for long-term strategies, risk management, and cautious optimism.
