The Indian stock market continued its sharp decline for the second consecutive day, as the Sensex and Nifty plunged further, erasing Rs. 10 lakh crore of investor wealth. Market sentiment remained fragile following U.S. President Donald Trump’s steep tariff hikes on steel and aluminum imports, fueling global trade concerns and sparking heavy foreign outflows.
A Steep Drop in Equities
On Tuesday, at 2:20 PM, the Sensex had tanked over 1,158 points (1.5%), while the Nifty fell more than 358 points (1.5%). The broader market fared worse, with the Nifty Midcap 100 sliding over 3% and the Nifty Smallcap 100 dropping by 4%. The market capitalization of all BSE-listed companies shrunk by a staggering Rs 9.68 lakh crore, reflecting the sheer scale of the ongoing sell-off.
Why the Markets are Crashing
- Trump’s Tariff Shock
Trump’s announcement of a 25% tariff on steel and aluminum imports has rattled global markets. The move is expected to hurt major exporters, including India, which is one of the largest aluminum producers globally. The U.S. is India’s top market for aluminum, and industry executives warn that exports could take a significant hit in the short term.
- Weak Global Cues and Foreign Outflows
The global sentiment has taken a hit, with U.S. and Asian markets showing weakness. Foreign institutional investors (FIIs) have been net sellers, pulling out capital in response to economic uncertainties. The Indian rupee also slumped to a historic low on Monday as the dollar strengthened on the back of Trump’s protectionist trade policies.
- Sectoral Bloodbath
The sell-off was broad-based, but banking, auto, and metal stocks took the biggest hit. Nifty Auto, Media, Pharma, PSU Bank, Healthcare, and Oil & Gas indices declined by 1-1.5% in early trade. Companies with significant global exposure, like Vedanta and Hindalco, saw sharp declines as investors worried about the longer-term impact of the tariffs.
- U.S. Fed Chair Powell’s Upcoming Testimony
Federal Reserve Chair Jerome Powell is set to deliver his semiannual monetary policy testimony before the U.S. Senate. His views on inflation, interest rates, and trade policies will be closely monitored. Markets expect the Fed to hold rates steady at its next meeting in March, but a prolonged trade war could change the rate trajectory.
Global Markets React
Global equities have not been spared, as concerns over trade tensions and economic uncertainty weigh heavy. The MSCI Asia ex-Japan index dropped 0.3%, while European steelmakers warned of severe disruptions following Trump’s announcement. Meanwhile, U.S. stock indices saw mixed results. The S&P 500’s materials sector gained as domestic steel companies like Nucor and Steel Dynamics surged 5.6% and 4.9%, respectively, on expectations of higher demand for U.S. steel production.
What Lies Ahead for Indian Markets?
The continued decline raises concerns over whether the market has hit a near-term bottom or if further volatility lies ahead. Several factors will shape the trajectory:
- Trump’s Next Move: The U.S. president has hinted at further reciprocal tariffs in the coming days, which could escalate the trade war.
- RBI’s Response: With the rupee hitting an all-time low, the Reserve Bank of India (RBI) may step in with measures to stabilize the currency and contain inflation.
- Corporate Earnings and Economic Data: Investors will keep an eye on key earnings reports and macroeconomic indicators for any signs of resilience in the Indian economy.
Investor Takeaways
While market crashes can be alarming, seasoned investors understand that volatility presents opportunities. Defensive sectors such as IT and FMCG have shown resilience and may be safe havens amid the turmoil. Experts suggest that long-term investors should use this correction to accumulate fundamentally strong stocks at lower valuations. However, given the global uncertainty, a cautious approach is warranted.
Looking ahead
The Indian markets are in a tailspin, and investor sentiment remains jittery. With global trade tensions on the rise and foreign outflows accelerating, market stability could take time to return. All eyes will be on key policy responses from both Indian regulators and global economic players. Until then, investors should brace for more market turbulence ahead.
