Sensex Crashes 800 Points: Why Share Market (NSE and BSE) is Falling on August 26, 2025?

On Tuesday, August 26, 2025, the Indian stock market suffered a sharp selloff across all segments. The Sensex opened at 81,377.39 against its previous close of 81,635.91 and quickly dropped nearly 800 points, or 1%, to an intraday low of 80,854.71. The Nifty 50 opened at 24,899.50 compared with its previous close of 24,967.75 and fell almost 1% to touch the day’s low of 24,741.90.

The broader markets also felt the heat, with the BSE Midcap and Smallcap indices underperforming by falling up to 1.5% during the session. The overall market capitalisation of BSE-listed firms fell to nearly ₹450 lakh crore from ₹455 lakh crore in the previous session, wiping out about ₹5 lakh crore of investor wealth. 

Around 2:30 PM, the Sensex was down 664 points, or 0.81%, at 80,972, while the Nifty was trading at 24,788, down 180 points, or 0.72%.

1. Trump’s Tariff Jitters

The primary reason for the sharp fall was the concern over US President Donald Trump’s tariff threats. India now faces the possibility of a 50% tariff on its exports to the US. On Monday, August 25, the Trump administration published a draft notice detailing its plan to impose this high tariff as the August 27 deadline for secondary tariffs approaches.

The US has made it clear that it will use tariffs as a way to pressure Russia into stopping the war in Ukraine. This hard stance has not only worsened India’s trade outlook but also raised the risk of a prolonged global trade war. On top of this, Trump threatened to impose additional tariffs on countries that levy digital taxes on American digital service providers, adding to investor nervousness.

2. Elevated Valuation Concerns

Another reason behind the selloff is the high valuation of Indian stocks. There is a mismatch between earnings growth and stock prices. Currently, the Indian market is trading at around 19 times projected FY27 earnings, which is considered expensive.

3. Continued FII Selling

Foreign Institutional Investors (FIIs) have been consistently reducing their exposure to Indian stocks in 2025. In August so far, FIIs have sold equities worth ₹28,217 crore in the cash segment, after already selling ₹47,667 crore worth in July.

4. Weak Global Market Sentiment

Global market conditions also played a role in the fall. Asian peers such as Japan’s Nikkei and Korea’s Kospi dropped nearly 1% each, following losses in US markets. Investor sentiment worsened after Trump dismissed US Federal Reserve Governor Lisa Cook over alleged misconduct related to mortgage loans.

This decision raised fresh concerns about the independence of the US central bank. Moreover, Trump has been publicly criticising Fed Chair Jerome Powell for not cutting interest rates, adding uncertainty to global monetary policy and market direction.

Read more: Dividend and Bonus Share Alert: Vedanta, Karur Vysya and More in Focus.

Conclusion

The August 26 market crash was the result of multiple factors: Trump’s tariff threats, expensive valuations, persistent FII selling, and weak global cues. Together, they created a wave of panic selling that erased ₹5 lakh crore of investor wealth in a single session.

While the long-term fundamentals of the Indian economy remain strong, the market is likely to stay volatile in the near term until global uncertainties ease and corporate earnings show meaningful improvement.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.