Why Did Nifty and Sensex Plunge on July 11, 2025?

On July 11, 2025, the Indian stock market faced a significant setback, with the BSE Sensex closing at 82,500.47, down 690 points or 0.83%, and the Nifty 50 settling at 25,149.85, down 205 points or 0.81%. This decline was triggered by a combination of domestic and global factors, including disappointing corporate earnings, escalating trade tensions, overvalued markets, a shift to safe-haven assets, and bearish technical indicators. For traders and investors visiting www.dailytraderoom.in, understanding these drivers is essential for navigating the volatile market landscape. Below, we analyze the key reasons behind the market’s fall and provide insights for informed decision-making.

Key Reasons for the Market Decline

1. Disappointing Q1 Earnings from TCS

The release of Tata Consultancy Services (TCS) Q1 earnings played a pivotal role in dampening market sentiment. TCS, a heavyweight in the Nifty 50 and a bellwether for the IT sector, reported a revenue of $7.42 billion for Q1 FY26, missing Bloomberg’s estimate of $7.54 billion. This marked a 0.59% quarter-on-quarter and 1.12% year-on-year decline, representing the worst Q1 performance since June 2020, with a 7% sequential fall. As the IT sector is a significant driver of India’s economic growth, TCS’s underperformance raised concerns about broader corporate earnings, leading to a sell-off in IT stocks and dragging the broader indices lower.

2. Escalation of US Tariff Threats

Global trade tensions intensified on July 11, 2025, following US President Donald Trump’s announcement of a 35% tariff on Canadian goods effective August 1, 2025. Additionally, Trump signaled that baseline tariffs for countries not receiving tariff letters could rise to 15-20%, up from the current 10%. This escalation dashed hopes for an early resolution to the ongoing trade war, raising fears of higher inflation and a potential global economic slowdown. For India, which has been navigating its own trade negotiations with the US, this development heightened uncertainty, prompting investors to adopt a risk-off approach. The negative global cues, coupled with subdued European indices (DAX and CAC 40 fell over 1%) and marginally negative US futures, further pressured Indian markets.

3. Stretched Market Valuations

The Nifty 50 was trading at a premium valuation of 22 times FY26 estimated earnings per share (EPS), with projected earnings growth in the low double digits. This high valuation, compared to other global markets like South Korea, Germany, Japan, and the MSCI Emerging Markets index, made Indian stocks appear overvalued. Shibani Kurian, senior fund manager at Kotak Mahindra AMC, noted that elevated valuations could cap near-term returns, leading to a market correction as investors reassessed their positions. India’s underperformance relative to other markets further fueled the sell-off, as capital flowed to more attractively priced markets.

4. Shift to Safe-Haven Assets

Amid global uncertainties, investors shifted capital from equities to safe-haven assets like gold and silver. On July 11, 2025, the MCX Gold August 5 contract surged nearly 1% to ₹97,548 per 10 grams, while the MCX Silver September 5 contract hit a record high of ₹1,11,552 per kilogram. This flight to safety was driven by tariff-related uncertainties and fears of a global economic slowdown, reducing demand for riskier assets like stocks. The move towards precious metals further exacerbated the downward pressure on the Sensex and Nifty.

5. Bearish Technical Indicators

From a technical perspective, the Nifty 50 exhibited clear bearish signals on July 11, 2025. The index broke below the critical support level of 25,200 and closed below its 20-day moving average, indicating a shift in momentum. The Average Directional Index (ADX) showed the DI+ line sloping downwards while the DI- line sloped upwards, confirming a bearish trend. Additionally, the Nifty fell below its 21-day Exponential Moving Average (EMA), and the Relative Strength Index (RSI) displayed a negative crossover, further reinforcing the downward momentum. Immediate support levels were identified at 25,090 and 24,900, with resistance at 25,150-25,160, suggesting caution for intraday traders.

Table: Nifty 50 Technical Levels on July 11, 2025

Indicator

Value/Status

Implication

Closing Level

25,149.85

Down 205 points (0.81%)

Support Levels

25,090, 24,900

Potential downside targets

Resistance Levels

25,150-25,160

Barriers to recovery

20-Day Moving Average

Breached (below)

Bearish signal

RSI

Negative crossover

Weakening momentum

ADX (DI+/DI-)

DI+ down, DI- up

Bearish trend confirmation

Sectoral Impact

The decline was broad-based, with significant selling pressure in key sectors:

• Banking: The Nifty Bank index fell 0.38% to 56,745, breaking below the 57,000 support level, with a bearish outlook targeting 56,600 or lower. Heavyweights like HDFC Bank (-1.16%) and Bajaj Finance (-1.55%) dragged the index down.

• Financial Services: The Nifty Financial Services index slipped 0.49% to 26,853.10, with 13 constituents declining, including ICICI Prudential Life (-2.07%).

• IT: TCS’s weak earnings led to a sell-off in IT stocks, further weighing on the broader indices.

Broader Market Context

The market’s decline on July 11 followed a period of cautious trading. Earlier in the week, the Nifty had shown resilience, bouncing back from a low of 25,472 on July 9 to trade near 25,522, with a positive bias towards 25,600. However, resistance at 25,670 and global uncertainties halted this momentum. Foreign institutional investors (FIIs) pulled out ₹5,179 crore in July, though domestic institutional investors (DIIs) provided some support with ₹8,844 crore in inflows. Despite this, the market breadth remained negative, with a 3:9 advances-to-declines ratio in the Nifty Bank index, reflecting a risk-off sentiment.

Outlook for Traders

Looking ahead, the Indian stock market may face continued volatility due to ongoing US tariff threats and the Q1 FY26 earnings season. Key sectors like IT and banking will be critical to watch, as their performance could dictate the market’s direction. Traders should monitor global cues, particularly US trade policy developments and upcoming earnings reports. Given the bearish technical setup, intraday traders might consider short-term hedging strategies, such as selling out-of-the-money call options or using stop-losses near support levels (25,090). Long-term investors may find opportunities in dips, supported by strong DII inflows and robust SIP assets under management, which crossed ₹15 trillion in June 2025, signaling sustained retail confidence.

Conclusion

The plunge in Nifty and Sensex on July 11, 2025, was a result of multiple headwinds: TCS’s disappointing Q1 earnings, heightened US tariff threats, overvalued market conditions, a shift to safe-haven assets, and bearish technical signals. For traders and investors on www.dailytraderoom.in, staying informed about these factors is crucial for navigating the current market volatility. Adopting a cautious approach, with a focus on risk management and sector-specific developments, will be key to capitalizing on opportunities while mitigating potential downsides.

Disclaimer

The information provided in this blog is for educational purposes only and should not be considered financial advice. Always conduct your own research and consult with a financial advisor before making investment decisions.