NextFin news, India's market capitalisation dropped significantly in the September quarter of 2025, falling to $5.08 trillion and lagging behind other major global equity markets, according to data reported on Wednesday, October 1, 2025.
The decline was primarily triggered by a combination of factors including the imposition of new tariffs by the U.S. government on Indian pharmaceutical exports, weak earnings and outlook in the IT sector, and sustained foreign institutional investor (FII) outflows.
On September 26, 2025, Indian stock markets experienced a sharp sell-off that erased nearly ₹7 lakh crore (approximately $85 billion) from the overall market capitalisation in a single trading session. Benchmark indices Sensex and Nifty fell steeply, with Sensex closing down 733.22 points at 80,426.46 and Nifty dropping 236.15 points to 24,654.70.
The U.S. administration, under President Donald Trump, announced a 100% import tariff on branded and patented pharmaceutical products from India effective October 1, 2025. This move raised immediate concerns over the earnings and export margins of Indian pharma companies heavily reliant on the U.S. market. The Nifty Pharma Index declined by 2.55%, hitting a one-month low, with all constituent stocks closing in the red. Major pharma companies such as Sun Pharma, Gland Pharma, and Natco Pharma saw share prices fall between 3% and 4%.
In addition to tariffs, the IT sector faced headwinds from increased H-1B visa fees imposed by the U.S., which raised operational costs for Indian IT firms. Global IT giant Accenture reported disappointing quarterly results and a cautious outlook, signaling an unstable recovery in global demand. The Nifty IT Index fell by up to 1.3%, contributing to the overall market weakness.
Foreign institutional investors intensified their selling pressure, withdrawing ₹4,995 crore on September 25 alone, bringing total FII outflows for September to ₹24,454 crore. This sustained exit of foreign funds heightened market volatility and weakened investor confidence.
The market decline was broad-based, affecting multiple sectors including pharmaceuticals, IT, banking, auto, and financial services. Midcap and smallcap indices also fell by as much as 2%, while sectoral indices such as PSU banks, metals, energy, and media declined between 1.5% and 2%.
Overall, India was the worst-performing market among the world's top 10 equity markets in the September quarter, while peers such as China, Taiwan, and the U.S. posted gains during the same period.
The combination of U.S. trade policy changes, weak corporate earnings, and foreign investor sentiment has created significant challenges for the Indian equity market, with investors closely monitoring global and domestic developments for further cues.
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