August turned out to be a roller-coaster month for the Indian stock market. On one side, aggressive tariffs imposed by the US triggered fear and uncertainty, sparking sharp declines and heavy selling by Foreign Institutional Investors (FIIs). On the other hand, India’s domestic economy showed resilience, inflation remained steady, GDP growth projections stayed intact, and Domestic Institutional Investors (DIIs) provided strong support. While tariffs hit investor sentiment hard, the strength of the domestic economy helped prevent a deeper fall.
Let’s look back at the major developments of August 2025 that shaped the markets and what lies ahead for September.
Market Performance in August 2025
The Indian stock market saw high volatility in August. After some recovery in the initial weeks, the indices eventually ended the month lower. As of August 29, the Nifty slipped 1.03% and the Sensex fell 1.34%. Uncertainty loomed until the August 27 tariff deadline, with no trade deal announced. This led to weakness and heavy selling. On August 26, just a day before the deadline, Nifty dropped 255.70 points to close at 24,712.05, while Sensex fell 849.37 points to settle at 80,786.54.
Among sectors, auto and FMCG showed relative strength, while financials and pharma bore the brunt of the decline.
US Fed’s Soft Stance and Global Signals
Globally, the economic backdrop remains fragile. The International Monetary Fund (IMF) has maintained its 2025 growth forecast at 3.0%, pointing to a slow recovery. The World Bank too has flagged risks from trade tensions and policy uncertainties, suggesting muted external demand for India’s exports — a situation worsened by the new tariffs.
However, there was a silver lining at the Jackson Hole Economic Symposium. US Federal Reserve Chairman Jerome Powell hinted at the possibility of an interest rate cut in September. For emerging markets like India, a Fed rate cut is significant, it usually weakens the US dollar, boosts global liquidity, and can draw foreign capital back into markets such as India.
Trump’s Tariff on India
The US decision to impose a 50% tariff on Indian goods marked a major setback in bilateral trade relations. Effective from August 27, 2025, the measure was justified by the US as a penalty for India’s discounted purchases of Russian oil.
This followed an earlier 25% tariff in July, which was doubled in August. While India’s generic pharma, electronics, and petroleum products were excluded from the new tariffs, existing 25% duties on aluminium, steel, and copper stayed intact. The steep 50% levy will primarily impact sectors like gems & jewellery, furniture, garments, footwear, and industrial chemicals.
According to The Guardian, Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), warned that exports from these affected sectors could shrink by almost 70%, from $60.2 billion to $18.6 billion. Overall, India’s exports to the US may fall by as much as 43%.
Major Change in GST Rates
On August 21, the Group of Ministers (GoM) approved a proposal to simplify GST by merging slab rates into two key brackets, 5% and 18%.
Under this structure, nearly all items in the 12% slab will move to 5%, while most goods from the 28% slab will shift to 18%. Only luxury and sin goods will continue attracting 28%, while essentials will remain taxed at 0% or 5%.
The GST Council will meet in Delhi on September 3–4 to give formal approval. According to reports, the new rates are expected to be implemented by September 22, potentially boosting consumption ahead of the festive season.
Ban on Online Real-Money Gaming
On August 21, Parliament passed the Promotion and Regulation of Online Gaming Bill, 2025. The law imposes a complete ban on online real-money games, aimed at curbing issues like addiction, financial distress, and social harm.
Earlier in the year, the government had already cracked down on several betting and gambling apps accused of operating illegally without approval.
Sectoral Performance in August 2025
Most sectoral indices ended August weaker, including defence, realty, capital markets, and PSEs. Auto and FMCG, however, bucked the trend and performed better.
Performance of Various NSE Indices in August 2025
Investors showed a preference for defensive sectors like healthcare, while capital markets and defence stocks faced selling pressure.
What Next for September?
Looking ahead, the GST Council’s September 3–4 meeting will be a key domestic event as it finalises the new two-rate structure. Globally, investors will keep an eye on Prime Minister Modi’s engagement with China, the outcomes of the SCO meeting, the US court ruling on Trump’s tariffs, auto sales data, monthly GST collections, and the Fed’s decision on a possible 25 bps rate cut.
India-US trade talks will also remain in focus. The White House has suggested that if India halts Russian oil purchases, a partial rollback of tariffs could be considered.
On the downside, persistent FII outflows may keep market sentiment under pressure.
Overall, volatility is expected to continue. Investors may be better off reducing exposure to export-oriented sectors and focusing instead on domestic consumption plays and companies with strong balance sheets.
*The article is for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
