Tuesday’s trading session on Dalal Street got off to a rocky start. The Nifty50, India’s premier benchmark index, was seen struggling near the psychologically crucial 25,000 level, while its counterpart, the BSE Sensex, plummeted by more than 170 points in early trade [[1]]. This sharp pullback isn’t happening in a vacuum; it’s the result of a perfect storm brewing from both international headwinds and domestic policy crosscurrents.
Investors, who had been riding a wave of optimism in recent weeks, are now hitting the brakes. The primary triggers? Renewed fears of a global trade war stoked by former U.S. President Donald Trump’s latest tariff rhetoric, and a growing sense of urgency—and anxiety—around the long-pending India-EU Free Trade Agreement. Let’s break down what’s really moving the markets today.
Table of Contents
- The Nifty50 and Sensex Selloff
- Trigger 1: Trump’s Tariff Threat Looms Large
- Trigger 2: The India-EU Free Trade Agreement Impasse
- Sectoral Impact: Who Is Getting Hit the Hardest?
- Global Cues Adding to the Pressure
- Conclusion: Navigating a Volatile Market
- Sources
The Nifty50 and Sensex Selloff
At the open of trade on January 27, 2026, the mood on the trading floor was decidedly bearish. The Nifty50 was trading at approximately 24,980, having shed significant ground from its previous close. Meanwhile, the 30-stock BSE Sensex was down by over 170 points, reflecting a broad-based selling pressure across major sectors [[1]].
This correction comes after a period of strong gains, suggesting that some profit-booking was inevitable. However, the scale and speed of the drop point to deeper, more fundamental concerns spooking investors.
Trigger 1: Trump’s Tariff Threat Looms Large
One of the most significant external factors rattling global markets is the resurgence of protectionist talk from former U.S. President Donald Trump. In a recent rally, Trump doubled down on his “America First” policy, threatening sweeping new tariffs on a wide range of imported goods if he wins the upcoming election [[1]].
For an export-oriented economy like India, such rhetoric is a major red flag. The potential for a renewed U.S.-led trade war could severely impact Indian IT services, pharmaceuticals, and textile industries—all key components of the Nifty50. The fear is that higher tariffs would make Indian goods less competitive in the world’s largest economy, directly hitting corporate earnings and, by extension, stock valuations.
Trigger 2: The India-EU Free Trade Agreement Impasse
On the domestic front, the long-anticipated India-EU Free Trade Agreement (FTA) has become a source of market anxiety rather than optimism. While negotiations have been ongoing for years, recent reports suggest that key sticking points—particularly around data security norms and market access for European dairy and liquor products—remain unresolved [[1]].
The market had priced in a positive outcome from these talks, expecting a boost to bilateral trade and a surge in foreign investment. The delay and perceived lack of progress have led to a reassessment of this optimistic outlook. Investors are now worried that the window for a deal before the European Parliament elections might be closing, creating a policy vacuum that could stall economic momentum.
Sectoral Impact: Who Is Getting Hit the Hardest?
The selloff has not been uniform. Certain sectors are bearing the brunt of the negative sentiment:
- IT Stocks: Heavily exposed to the U.S. market, these are the most vulnerable to Trump’s tariff threats. Major players like TCS and Infosys saw notable declines.
- Auto & Manufacturing: Concerns over global supply chain disruptions and reduced export demand are weighing on these sectors.
- Banking: While relatively stable, private banks are seeing some profit-booking after a strong run-up.
Global Cues Adding to the Pressure
Indian markets don’t operate in isolation. Overnight, Asian markets were largely in the red, following a weak performance on Wall Street. U.S. indices closed lower on Monday, driven by the same trade war fears and a batch of mixed economic data that has reignited recession anxieties [[1]].
This global risk-off sentiment has created a domino effect, with foreign portfolio investors (FPIs) becoming more cautious about their emerging market allocations, including India. A potential outflow of FPI capital is a direct headwind for the Nifty50.
Conclusion: Navigating a Volatile Market
The current dip in the Nifty50 serves as a stark reminder of the interconnectedness of the global economy. While India’s fundamentals remain strong, external shocks can create significant short-term volatility. For investors, the key is to avoid panic selling and instead focus on the long-term growth story. However, the next few days will be critical, as market participants await clearer signals on both the U.S. political landscape and the progress of the India-EU trade talks. Staying informed is your best defense. For more on how global events shape your portfolio, see our guide on [INTERNAL_LINK:how-global-politics-affect-indian-stocks]. You can also track real-time market data on the official NSE India website.
Sources
- [[1]] Times of India – Stock market today: Nifty50 near 25,000; BSE Sensex drops over 170 points