Sensex plunges amid global trade war fears, with significant losses in market capitalization and investor wealth. Key factors include tariff threats and weak Asian markets.
Indian equity benchmarks Sensex and Nifty experienced significant selling pressure on February 28, driven by escalating concerns about a potential global trade war. Market capitalization of BSE-listed firms declined substantially. Nifty hit a 9-month low, marking a concerning period for investors.
At 12:55 pm, the Sensex was down 1,335.93 points, or 1.79%, at 73,276.50, while the Nifty was down 406.10 points, or 1.8%, at 22,138.95. Market capitalization of BSE-listed firms declined a significant Rs 6.1 lakh crore on February 28. The Nifty 50 has fallen approximately 5% in February, heading towards its fifth consecutive month of losses, its longest losing streak in 29 years.
Key Factors Behind the Market Decline
Trade War Fears
On February 27, US President Donald Trump announced that the 25% duties on imports from Canada and Mexico would take effect on March 4, reversing an earlier suggestion of April 2. Furthermore, Trump indicated that goods from China would face an additional 10% duty, intensifying fears of an escalating trade conflict.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented: “Stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected the US president. The spate of tariff announcements by Trump has been impacting markets and the latest announcement of additional 10% tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favourable to the US. How China responds to the latest round of tariffs remains to be seen. Even now the markets have not discounted a full blown trade war between the US and China. It is likely to be avoided. However, the uncertainty element has increased as reflected in the sharp spike in CBOE volatility index to 21.13.”
Vijayakumar added, “March is likely to witness recovery in the Indian market backed by better macro news flows and subdued FII selling. Since largecap valuations are fair, and in pockets attractive, FIIs are unlikely to press selling as aggressively during the last few months. Long-term investors can utilise the weakness in the market to slowly accumulate fairly-valued quality largecaps and select fairly-valued stocks in the broader market, like defence stocks for instance.”
Weak Asian Markets
Hong Kong equities experienced a decline on Friday, poised to end a six-week winning streak following Trump’s fresh tariffs on Chinese imports and profit-taking on tech stocks. Hong Kong’s benchmark Hang Seng slipped 2.3%. Chinese shares also fell, with the blue-chip CSI300 Index dropping 0.8% and the Shanghai Composite Index losing 0.9%.
Japanese stocks witnessed the largest weekly foreign outflow in nearly five months, totaling 1.04 trillion yen ($6.95 billion), influenced by a stronger yen, rising inflationary concerns, and uncertainties surrounding Trump’s tariff policies.
Nvidia Q4 Results Effect
The Nikkei share average hit a five-month low of 37084.44 on Friday, weighed down by chip-related stocks after Nvidia’s growth forecast failed to boost sentiment. Overnight, Nvidia tumbled 8.5% after providing a weaker-than-expected quarterly forecast for gross margin.
The Hang Seng Index was set to decline 1.3% for the week, ending a six-week period of gains, as investors engaged in profit-taking in the tech sector.
UBS analysts suggested that Xiaomi’s product launch event and Tencent’s new AI launch could serve as catalysts for further profit-taking in Hang Seng names on Friday.
Ting Lu, chief China economist at Nomura, stated that Trump’s cabinet has exhibited a hawkish stance towards China, expecting tensions between the two economies to worsen, especially as China advances in high tech, including AI and robotics.
Tech majors in Hong Kong slid nearly 4% on the day, after a nearly 30% surge earlier in the year.
US Economy Fears
The IT index tumbled 4% as data revealed a higher-than-expected rise in U.S. weekly jobless claims, raising concerns about a potential slowdown in the world’s largest economy, with inflation expectations surging due to Trump’s tariffs.
The IT index has fallen nearly 8% this week, compared to a fall of just over 2% in the Nifty 50.
Additional Market Insights
Rediff Money Desk reported that the Sensex fell 1,073 points and the Nifty slumped over 300 points, mirroring global declines. The 30-share BSE benchmark Sensex tanked 1,073.48 points to 73,538.95, while the NSE Nifty slumped 327.55 points to 22,217.50 during afternoon trade.
Tech Mahindra, IndusInd Bank, Titan, Infosys, Mahindra & Mahindra, Maruti, HCL Tech, and Tata Consultancy Services were among the biggest laggards from the Sensex pack. HDFC Bank, Axis Bank, Reliance Industries, and Adani Ports were the gainers.
Ameya Ranadive, Chartered Market Technician, CFTe, Sr Technical Analyst, StoxBox, noted that Asian equities fell following heavy selling on Wall Street, as traders grappled with underwhelming Nvidia Corp results, further details on US tariffs, and mixed economic data.
Investor Sentiment and Outflows
Investors’ wealth tumbled significantly as the market capitalization of BSE-listed firms eroded. Fresh tariff threats and relentless foreign fund outflows dented investor sentiment.
Vikas Jain, Head of Research at Reliance Securities, noted that the US market fell, closing at a five-month low, while US Treasury yields rose following President Donald Trump’s new tariff threats.
Foreign institutional investors (FIIs) offloaded equities, according to exchange data. Global oil benchmark Brent crude experienced a slight dip.
Sources:
https://www.moneycontrol.com/news/business/markets/rs-6-lakh-cr-wiped-out-sensex-plunges-1-000-pts-nifty-at-9-month-low-trade-war-fears-among-key-factors-behind-market-crash-12952765.html
https://money.rediff.com/news/market/sensex-tanks-1-073-points-on-global-market-crash-trump-tariffs/22797220250228
https://www.ndtv.com/business-news/investors-become-poorer-by-rs-7-46-lakh-crore-as-markets-sensex-nifty-crash-lose-1000-points-7813930