Markets rebound after 4-day slump, but trade worries, weak earnings remain

Indian equities bounced back strongly on Tuesday after four consecutive sessions of losses, lifted by value buying in select sectors and supportive global cues. However, concerns over the stalled India–US trade talks, persistent foreign capital outflows and underwhelming corporate results continue to weigh on investor sentiment.

The Sensex, which had opened lower at 80,620.25 and slipped more than 300 points to an intraday low of 80,575.45, staged a sharp reversal to touch a high of 81,306.50.

The Nifty also clawed back above the 24,800 mark, rising to 24,814.60 after hitting an early low of 24,598.60. Gains in Jio Financial Services, Larsen & Toubro, Asian Paints, Bharti Airtel and Apollo Hospitals, which rose up to 4 per cent, helped drive the recovery.

The rebound came after a steep sell-off that had erased over Rs 13 lakh crore in investor wealth across four sessions. Since 23 July, the Sensex has shed more than 2,100 points—nearly 3 per cent—while the Nifty has slipped 2.5 per cent, reflecting a mix of global and domestic pressures.

Why markets have been under pressure

Trade deal uncertainty: With the 1 August deadline looming, the much-anticipated India–US trade pact remains elusive. Washington’s push for greater access to Indian agriculture, dairy and GM products has met stiff resistance from New Delhi, fuelling concerns of a breakdown in negotiations. “The probability of a deal before the deadline is becoming lower,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments.

Relentless FPI selling: Foreign portfolio investors have been heavy sellers, pulling Rs 36,591 crore out of Indian equities in July so far, including Rs 19,630 crore over the past six sessions. Valuation concerns and global headwinds have amplified the outflows.

Weak corporate earnings: First-quarter results have largely disappointed, raising fears of a valuation mismatch. “The Q1 numbers have not shown any major positive surprises. Investors need to be cautious and stock-specific,” Vijayakumar added.

Lack of positive triggers: Despite resilience in the broader economy, analysts argue that markets lack fresh catalysts to drive momentum. Veteran investor Shankar Sharma reiterated his view that the Indian bull run is “ageing”, noting that the past year has delivered “zero returns” on a broader market basis.

Meanwhile, both the Asian Development Bank and India Ratings have trimmed their FY26 growth forecasts to 6.5 per cent and 6.3 per cent respectively, citing global tariff risks and weakening domestic conditions.

Technical pressures: The Nifty’s slide below 24,700 has compounded weakness. Analysts caution that unless the index sustains above 25,000, selling pressure may persist. “The 24,400–24,500 zone is a key support, with 24,200 as the next test for bulls,” said Akshay Chinchalkar of Axis Securities.

Why markets bounced back on Tuesday

After the sharp decline, bargain hunters stepped in, particularly in IT, metals and realty stocks. The Nifty Realty index gained nearly 2 per cent after five days of losses, while autos also saw renewed buying.

Volatility also cooled, with the India VIX falling 2.9 per cent to 11.71, signalling improved risk appetite. In addition, global markets provided relief, with Shanghai and Seoul trading higher and Wall Street futures pointing to a stronger US open.

Anand James, Chief Market Strategist at Geojit Financial Services, noted that the market may be nearing “peak fear”. He highlighted repeated support in the 24,650–24,750 range and said a reversal could gain momentum if the Nifty stays above 24,788, with 24,922–25,050 acting as resistance.

While Tuesday’s rebound has offered relief, sentiment remains fragile. Analysts warn that unless there is clarity on the trade negotiations and a turnaround in earnings, volatility is likely to persist. For now, traders are advised to remain cautious, adopt a “sell-on-rise” approach, and closely watch the 25,000 mark for signs of stability.