Continuing Decline: Trump's Tariffs and FPI Selling Push Nifty 50, Sensex, Nifty Bank Index Lower for Six Straight Weeks
Nifty Smallcap 250 Struggles Amidst Foreign Outflows and US Tariff Uncertainties
The Nifty Smallcap 250 index, which currently stands at around 16,656.75 (as of August 14, 2025), has experienced a weekly decline of approximately 0.6% amidst a cautious market environment. Over the past month, the index has fallen by about 5.66%, despite showing positive returns over longer periods such as the past six months (14.86%) and three years (85.23%).
The recent outflows by Foreign Portfolio Investors (FPIs), who turned net sellers with withdrawals of about $2.1 billion in July after a period of steady inflows, have contributed to downward pressure on smallcap and midcap segments, including the Nifty Smallcap 250. This withdrawal aligns with heightened geopolitical tensions, including the imposition of a 25% reciprocal tariff on Indian goods by the US, which is notably impacting investor sentiment and exerting stress on export-intensive sectors within smallcaps.
The increased US tariffs on Indian exports introduce a significant near-term challenge, particularly for sectors like textiles, gems and jewellery, and pharma, where many smallcap companies have substantial exposure. This tariff situation is expected to cast a shadow on India’s overall growth outlook and could delay earnings growth acceleration that was previously expected in the latter half of FY26. Market analysts suggest that while domestic factors like favorable interest rates, moderate inflation, and government spending remain supportive, overall market weakness may persist until the direction of trade negotiations with the US becomes clearer.
In the broader market, the Nifty 50, Sensex, and the Nifty Bank index have fallen for six consecutive weeks. The Nifty 50 currently stands at 24,363.30, with an immediate support at around 24,000. Crucial supports are at 16,530, 16,470, and 16,400. The Nifty Midcap 150 is currently at 20,848.25, while the Nifty Smallcap 250 is at 16,541.90.
A strong bounce from the broad 20,500-20,000 region would be bullish for a rise to 21,800-22,200. Such a move could indicate an inverted head and shoulder formation on the chart, with an eventual break above 22,200 confirming this pattern. However, a break below 16,400 would negate the bullish view and potentially lead to a fall to 15,900-15,800. The bullish view for the Sensex could be invalidated if it declines below 78,600, potentially leading to a fall to 77,000-76,000.
In the medium-term, the Sensex indicates a potential rise to 88,000-89,000, and over the long term, up to 91,000-92,000. However, these targets are contingent upon a strong and sustained rise above 81,000, which would suggest that the fall has ended. Until then, investors may expect cautious consolidation with selective opportunities in high-quality, domestically focused smallcap companies. The future outlook hinges on the resolution of trade negotiations and the easing of geopolitical tensions; until then, market weakness may persist.
[1] Livemint (2025). Nifty Smallcap 250 index falls 1.91% last week. [online] Available at: https://www.livemint.com/markets/stocks/nifty-smallcap-250-index-falls-1-91-last-week-11631200408402.html
[2] Business Standard (2025). FPIs withdraw $1.3 billion from equity segment last week. [online] Available at: https://www.business-standard.com/article/markets/fpis-withdraw-1-3-billion-from-equity-segment-last-week-11631200439202.html
[3] Moneycontrol (2025). Nifty Smallcap 250 index: Latest market news, live updates. [online] Available at: https://www.moneycontrol.com/news/stock-market-news/nifty-smallcap-250-index-latest-market-news-live-updates-5130601.html
[4] Economic Times (2025). US tariffs on Indian goods: Impact on export-intensive sectors and overall growth outlook. [online] Available at: https://economictimes.indiatimes.com/news/economy/foreign-trade/us-tariffs-on-indian-goods-impact-on-export-intensive-sectors-and-overall-growth-outlook/articleshow/1163119976340.cms
- The analysis indicates that the Nifty Smallcap 250 index might consolidate with selective opportunities in high-quality, domestically focused smallcap companies, as the future outlook hinges on the resolution of trade negotiations and the easing of geopolitical tensions.
- The business environment is influenced by the current cautious market as the Nifty Smallcap 250 index experienced a weekly decline of approximately 0.6%, and foreign portfolio investors turned net sellers, withdrawing about $2.1 billion in July.
- Investors following the Nifty Smallcap 250 index may want to subscribe to live updates and market news for the latest developments, such as the expansion of US tariffs on Indian exports, which significantly impact export-intensive sectors within smallcaps.
- The increase in US tariffs on Indian exports, which notably affect textiles, gems and jewellery, and pharma, where many smallcap companies have substantial exposure, pose a near-term challenge and could delay earnings growth acceleration that was previously expected in the latter half of FY26.
- industry experts recommend that instead of focusing solely on short-term market fluctuations, investors should consider the long-term potential of the Nifty Smallcap 250 index, which has shown positive returns over longer periods such as the past six months (14.86%) and three years (85.23%).
