Sensex scores 800 points and Nifty sees a decisive slump. Can Investors Ignore Trump to Buy the Dip?

Indian stock markets extended their losing streak for the fourth straight session as geopolitical tensions and renewed fears of aggressive US tariff measures shook investor confidence. The Sensex lost nearly 800 points in Thursday’s session, marking a decisive collapse after a week of consolidation, while the Nifty 50 fell sharply below crucial technical levels, raising questions on whether the recent correction represents a buying opportunity or a sign of deeper troubles ahead.The Nifty ended the day with a loss of 1% and fell below the 25,900 mark, which analysts described as a technically significant move. SBI Securities said the index exited the rising channel on the daily chart and, more importantly, ended below the 50-day exponential moving average for the first time since early October.

That level has previously acted as strong support three times, making the breakout a clear negative signal for short-term momentum. Technical indicators reflected the weakness, with the daily relative strength index also sliding below its rising channel, reinforcing the bearish undertone.Market breadth deteriorated sharply as selling pressure increased across sectors. As many as 45 of the Nifty’s 50 voters ended the session in the red. Hindalco Industries and Wipro emerged as the biggest losers among the frontline stocks, while Eternal and SBI Life Insurance managed to close higher and provided limited support to the indices.

Sector-wise, losses were widespread, with all major indices ending lower. Metals, oil and gas stocks and PSU banking stocks were among the worst-hit sectors, reflecting broad risk aversion rather than stock-specific triggers.

The correction was even more severe in the broader market. The Nifty Midcap 100 and Nifty Smallcap 100 both fell almost 2%, underperforming the benchmark indices. The midcap index fell below the 20-day EMA, while the smallcap index exceeded all its major moving averages, a sign that sentiment in the broader market has weakened significantly.

The immediate reason for the sell-off came from new geopolitical developments in the US. U.S. Senator Lindsey Graham said U.S. President Donald Trump has approved a bipartisan Russia sanctions bill that could sharply increase tariffs on Russian imports into the United States to at least 500% of their value. The proposed legislation could also be used as leverage against countries such as India, China and Brazil that continue to buy Russian oil. Graham indicated the bill could go to a bipartisan vote as soon as next week and expressed confidence in strong cross-party support.

Trump has also warned of higher tariffs on Indian goods if New Delhi does not address US concerns over Russian crude oil imports. Currently, the US has already imposed tariffs of up to 50% on certain Indian products, with roughly half of these directly linked to India’s oil purchases from Russia. These comments revived fears of trade-related disruptions just as markets stabilized around record highs.

Sales to foreign investors have continued in the new year too, with outflows of over Rs 1,600 crore already recorded, putting further pressure on the markets.

Should Investors Buy the Dip?

Vinod Nair, head of research at Geojit Investments, said finalizing a trade deal with the US remains crucial for India’s market performance. He noted that investors had expected rates to be capped at 25% from the current 50% and a broader agreement to follow.

However, he warned that continued negative rhetoric from Trump could dampen market sentiment. Nair added that while exports have shown resilience so far, prolonged uncertainty could hurt India’s future export prospects.

However, analysts say India’s first GDP estimate for FY26 points to robust growth, driven by a recovery in manufacturing and a resilient services sector, providing some support amid external headwinds.

From a technical perspective, Sudeep Shah, head of technical and derivatives research at SBI Securities, said the Nifty has crucial support in the 25,750-25,700 zone. “A sustained move below 25,700 could open the door for a deeper correction towards 25,550. On the upside, the 26,000-26,030 range is expected to act as an immediate hurdle.”

“A sustained close below 25,900 increases the chances of a further decline towards the 25,800-25,700 zone, while a recovery above 26,000 is essential to stabilize sentiment in the near term. Despite the current correction, the broader weekly and monthly trend structure remains positive, although short-term corrective pressure may persist if key supports fail to hold,” said Ponmudi R, CEO of Enrich Money, a Sebi-registered online trading firm and wealth technology company.

For investors, the key question now is whether this decline represents a healthy correction from record highs, or the start of an extended phase of volatility. Analysts suggest that while long-term fundamentals remain intact, near-term caution is warranted as markets grapple with geopolitical risks, rate uncertainty and earnings-related triggers.

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(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)