The Sensex took a sharp tumble, falling by over 850 points, as global concerns, particularly the US tariff situation, continued to spook investors on Dalal Street. The benchmark indices, including the S&P BSE Sensex and NSE Nifty50, saw significant losses early on, with the Sensex shedding 834.39 points to reach 75,459.21, and the Nifty50 plunging 251.95 points to 22,819.85. The market capitalization of BSE-listed companies dropped by a staggering Rs 6 lakh crore, adding to the negative sentiment.
The steep declines are largely driven by fears of the impact of US tariffs on global trade, which have kept investors on edge. The uncertainty around President Trump’s tariff policies, particularly his shift from targeting specific countries like China and Mexico to imposing broader import tariffs on steel and aluminum, has escalated concerns. The European Union’s plans for counter tariffs have raised the prospect of a full-blown trade war, compounding the situation. Analysts believe that the volatility will persist as long as these uncertainties remain unresolved.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the growing impact of Trump’s trade policies on market sentiment. He explained that while Trump’s tariff actions may raise inflation in the US, the Federal Reserve’s hawkish response could lead to a downturn in the US stock market, ultimately curbing the negative impact on global markets. However, he cautioned that this process would take time, and in the meantime, market volatility would likely continue. Vijayakumar also recommended that investors take advantage of the current market weakness by shifting from mid- and small-cap stocks, which he believes are still overvalued, to large-cap stocks that offer better value.
Adding to the challenges, foreign institutional investors (FIIs) have continued to sell, exacerbating the market downturn. FII outflows have already reached Rs 1 lakh crore this year, further dampening investor sentiment. The Nifty has fallen 2.42% year-to-date, and is now 12% below its September 2024 all-time high.
Despite the negative outlook, there was some positive news, with the Indian rupee recovering further against the US dollar. Additionally, investors are awaiting the release of retail inflation data, which is expected to show a drop to a five-month low of 4.6% in January, thanks to easing food prices.
The overall sentiment on Dalal Street remains pessimistic, and analysts warn that if the Nifty slips below the crucial 23,000 mark, further declines could be expected.
