Indian benchmark indices ended in the red on Monday, with heavyweights Reliance Industries and Larsen & Toubro leading declines on the benchmarks, mirroring losses in regional markets after U.S. President Donald Trump’s sweeping tariffs on Canada, Mexico, and China fueled fears of an escalating trade war.
The benchmark BSE Sensex lost 319.22 points or 0.41% to close at 77,186.74, while the broader Nifty 50 index closed at 23,361.05, lower by 121.10 points or 0.52%.
The market capitalization of all listed companies on the BSE decreased by Rs 5.30 lakh crore to Rs 419.49 lakh crore.
Factors
1) Trump tariffs trigger trade war fear
The decline follows Trump’s decision to impose tariffs on Canada, Mexico, and China over the weekend, sparking concerns about the potential impact on global growth.
Trump followed through with threats to slap Canada and Mexico with duties of 25% and China with a 10% levy at the weekend, calling them necessary to combat the flow of migrants and fentanyl into the U.S.In response, Canada and Mexico immediately vowed retaliatory measures, while China announced plans to challenge the tariffs at the World Trade Organization. The tariffs, outlined in three executive orders, are set to take effect on Tuesday.2) US dollar at record peak
The US dollar shot to a record peak against the Chinese yuan in offshore trading, and its highest against Canada’s currency since 2003 and the strongest against the Mexican peso since 2022.
Meanwhile, the Indian rupee weakened past Rs 87 per US dollar for the first time on Monday, following Trump’s tariff impositions on the country’s largest trading partners, which drove a surge in the US dollar.
“For now, India is not affected. Therefore, the impact on the Indian market will be less. But the spike in the dollar index to above 109.6 will trigger more selling by FIIs putting the market under pressure,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
3) US treasury yields rise
US two-year Treasury yields rose by as much as 3.6 basis points to 4.274%, hitting a one-week high, amid concerns that tariffs could stoke US inflation and delay interest rate cuts. This rise in US Treasury yields is negative for emerging economies like India, as higher US yields typically attract capital flows away from riskier assets in emerging markets, leading to currency depreciation and higher borrowing costs.
4) Technical indicator
Akshay Chinchalkar, Head of Research at Axis Securities, said, “Today is most likely going to be a gap-down given the selloff in US equity futures and regional equities including the Gift Nifty on the tariff announcement. Immediate support stands in the 23246 – 23267 zone followed by an extension in the 23108 area, with near-term resistance coming into play between 23632 and 23657.”
“Meanwhile, the weekly chart traced a “bullish engulfing” formation inside the Ichimoku cloud, the first time that’s happened since March ’22. Still, expect more than average volatility in the month of February, given that based on two decades of data, the nifty has produced the worst returns in the month, losing 1% on average,” Chinchalkar added.
5) Jump in oil prices
Oil prices surged following the announcement of US tariffs, which raised concerns about potential crude supply disruptions from two of the biggest suppliers to the US However, the prospect of lower fuel demand capped the gains.
US West Texas Intermediate (WTI) crude futures were trading at $73.97 a barrel, up $1.44, or 2%, by 0042 GMT, after hitting a week-high of $75.18 a barrel earlier in the session. Brent crude futures rose 62 cents, or 0.8%, to $76.29 a barrel, after touching a high of $77.34.
With inputs from agencies
The Indian stock market witnessed a massive 319-point drop in the Sensex and Nifty dropping below 23,400, wiping out a staggering Rs 5.3 lakh crore in market value. Among the top five factors behind this downfall, Trump’s tariffs have played a significant role.
President Donald Trump’s unpredictable trade policies have created uncertainty in the global markets, leading to increased volatility and investor nervousness. The recent escalation in the US-China trade war and the imposition of tariffs on various goods have added to the fears of a global economic slowdown.
The Indian markets, being highly interconnected with the global economy, have felt the impact of these tariffs. Investor sentiment has been dampened, leading to a sell-off in stocks across various sectors. The automotive, IT, and metals sectors have been hit particularly hard, with many companies seeing a sharp decline in their stock prices.
Other factors contributing to the market downfall include rising crude oil prices, weak corporate earnings, and concerns over the economic slowdown. The combination of these factors has created a perfect storm, causing the markets to tumble and erasing billions of rupees in market value.
Investors are advised to remain cautious in the current volatile market environment and to diversify their portfolios to mitigate risks. The coming days will be crucial as global trade tensions continue to escalate, and market participants brace for further turbulence.
Tags:
- Rs 5.3 lakh crore loss
- Trump tariffs impact on Sensex
- Nifty below 23,400
- Stock market drop
- Economic impact of Trump tariffs
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