Global Trade Concerns and Weak Earnings Weigh on Market Sentiment

The Sensex and Nifty erased early losses to trade flat in the second half of the session on March 3, after initially sliding over 0.5% around noon. While IT stocks offered support, the broader market sentiment remained fragile due to U.S. tariff concerns, persistent foreign investor selling, and weaker-than-expected corporate earnings.

Market Performance at a Glance

Sensex: Up 30 points at 73,228
Nifty: Gained 27 points (0.1%) to 22,152
Market Breadth: Weak, with 626 advancing stocks and 2,021 declining on the NSE
BSE Midcap Index: Flat
BSE Smallcap Index: Declined over 1%

Stocks Recover from Nine-Month Lows After a Steep Decline

In the previous session, both indices had plunged nearly 2%, hitting nine-month lows. The Sensex and Nifty have now fallen 18% and 19% respectively from their September 2024 peaks.

Meanwhile, the BSE Smallcap and Midcap indices have tumbled over 20%, officially entering bear market territory.

Foreign Selling Continues to Deepen Market Weakness

Relentless selling by foreign institutional investors (FIIs) remains a key factor behind the ongoing market downturn.

FIIs offloaded ₹58,988 crore worth of Indian equities in February
Domestic investors purchased ₹64,853 crore, acting as a counterforce but failing to offset foreign selling completely

“The primary factor driving the sell-off is continued FII outflows,” said Ravi Diyora, Director of Research at Kunvarji Group. He also cited U.S. policy unpredictability under Donald Trump as a growing concern.

Earnings Disappointments Add to Market Worries

A lackluster Q3 FY25 earnings season has further weakened investor sentiment.

Fewer than 50% of Nifty 50 companies managed to beat earnings expectations over the last two to three quarters
Analysts say this is the worst earnings trend since COVID-19, contributing to ongoing market weakness
Earnings downgrades and missed estimates have fueled bearish sentiment

March Sees Lower Investment Activity Amid Fiscal Year-End Pressures

Analysts also note that March is traditionally a slow month for investments, as institutional and retail investors focus on financial year-end obligations. This has further limited buying interest, exacerbating the market’s volatility.

GDP Growth Offers Brief Optimism Before Tariff Uncertainty Dampens Sentiment

Fresh economic data released on February 28 showed that India’s GDP grew 6.2% in Q3 FY25, boosted by strong government and consumer spending.

However, this optimism was short-lived as analysts warned that the full impact of new tariff uncertainties is yet to be seen.

“As strong as the GDP numbers seem, they don’t fully account for the impact of new tariff uncertainties,” Diyora pointed out.

US-India Trade Talks Amid Tariff Concerns

On March 2, U.S. Commerce Secretary Howard Lutnick confirmed that tariffs on Canada and Mexico would take effect on March 4, with uncertainty surrounding the planned 25% level.

Meanwhile, India’s trade minister Piyush Goyal has traveled to the United States for trade negotiations, ahead of Trump’s proposed reciprocal tariffs.

During PM Narendra Modi’s U.S. visit last month, both countries agreed to finalize the first phase of a trade deal by Fall 2025
The long-term goal is to reach $500 billion in bilateral trade by 2030

Sectoral Trends: IT Gains, Oil & Gas Drags Market Lower

Nifty IT gained 0.8%, supported by positive brokerage commentary following Salesforce’s forecast of 7-8% growth in FY26
Nifty Oil & Gas fell over 1%, dragged down by Reliance Industries (RIL), ONGC, and IGL
- Reliance Industries dropped 3% to a 16-month low, amid reports that its subsidiary Reliance New Energy faces fines over delays in setting up a battery cell plant

Top Gainers and Losers on Nifty 50

Biggest Losers:

Bajaj Auto (-3%)
Bajaj Finserv (-2.5%)
IndusInd Bank (-2%)
Reliance Industries (RIL) (-3%)
Coal India (-3%)

Coal India shares fell 3% after a weak business update for February, indicating a decline in production, further hurting investor sentiment.

Top Gainers:

Wipro (+2%)
Grasim Industries (+3%)
Eicher Motors (+2.5%)
UltraTech Cement (+4%)
Bharat Electronics Ltd (BEL) (+3.5%)

Meanwhile, Coffee Day Enterprises surged 20%, following a favorable NCLAT ruling dismissing a bankruptcy plea filed by IDBI Trusteeship over a ₹228 crore default.

Technical View: Nifty Faces Resistance at 24,073, Downside Risks Remain

According to Prashanth Tapse, Senior VP (Research) at Mehta Equities, Nifty remains technically weak below 24,073, with downside risks at 22,000 and 21,281.

Outlook: What’s Next for Markets?

Highlight Factors to Watch:

US-India Trade Talks: Any developments on trade negotiations will be crucial in determining market direction.
Foreign Investor Trends: Continued FII selling could drag markets lower, while a reversal in flows might stabilize sentiment.
Corporate Earnings: Investors will closely monitor upcoming quarterly results for signs of a potential earnings recovery.
US Tariff Policy: Any further escalation in trade tensions could trigger another sell-off in global markets.

Should Investors Buy the Dip?

While some analysts see the current correction as a long-term buying opportunity, others warn that volatility may persist due to macroeconomic uncertainties.

“Investors should focus on fundamentally strong stocks with long-term growth potential,” said Diyora.

Volatility to Persist, but Buying Interest Could Return

While Sensex and Nifty recovered from early losses, the market remains fragile amid global trade concerns, weak earnings, and foreign investor selling.

With March being a historically slow month for investments and U.S. tariffs looming, markets could remain volatile in the near term. However, long-term investors may find selective opportunities as valuations correct.

Bottom Line: Markets are likely to stay on edge, with near-term risks outweighing immediate recovery prospects. Investors should brace for continued volatility and watch global trade developments closely.