Market Witnesses Sharp Decline as Global Trade Concerns Escalate

The Indian stock market witnessed a sharp reversal on Wednesday, with the benchmark Sensex tumbling nearly 800 points from its intraday high and the Nifty slipping below the 22,400 mark. The downturn was driven by escalating global trade tensions, cautious investor sentiment ahead of key macroeconomic data, and concerns over a potential US recession.

Market Performance: A Day of High Volatility

The BSE Sensex dropped 793.99 points from its peak, touching a low of 73,598.16 before recovering marginally.
The NSE Nifty fell 247.85 points, hitting an intraday low of 22,329.55, dragged down by heavy selling in IT, banking, and real estate stocks.
Infosys, Wipro, and HCL Technologies were among the worst-performing stocks, contributing significantly to the decline in the Nifty 50 index.

Factors Behind the Market Decline

1) Trade War Fears and Tariff Uncertainty

Investor sentiment was rattled by growing concerns over a potential global trade war, following US President Donald Trump’s comments on increasing tariffs on steel and aluminum imports from Canada.

Initially, Trump proposed a 50% tariff hike before indicating he might reconsider.
Market analysts warned of retaliatory tariffs, set to take effect in April, which could further impact global trade and investor confidence.
“Markets across the globe are facing uncertainty due to the lack of clarity on trade policies. The situation may deteriorate further if reciprocal tariffs come into play,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

2) Cautious Trading Ahead of Key Macroeconomic Data

Investors remained on edge ahead of upcoming macroeconomic data releases from both India and the US, which could influence market direction.

Foreign institutional investors (FIIs) have offloaded stocks worth Rs 4,17,216 crore on a net basis this fiscal year, exacerbating the selling pressure.
Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd., noted that institutional outflows have contributed to the weakness in Indian equities.

3) Concerns Over a Possible US Recession in 2025

Adding to market uncertainty, President Trump did not rule out the possibility of a US recession next year.

In an interview with Fox News, he stated:
“There is a period of transition, because what we are doing is very big – we are bringing wealth back to America. It takes a little time.”
This statement heightened fears of a potential economic slowdown in the US, leading to nervousness among global investors.

Technical Analysis: Volatility Expected to Persist

According to Anand James, Chief Market Strategist at Geojit Financial Services, technical indicators signaled a reversal in the market trend.
The rejection trades from the 20-day Simple Moving Average (SMA) and the formation of an evening star candlestick pattern pointed to a market correction.
“The 22,350-22,300 zone provided some buying support, triggering a rebound. However, the inability to cross 22,520 keeps the trend evenly poised. Until the index sustains above this level for a few hours, chasing upsides could be risky,” James explained.

Sectoral Impact: IT, Banking, and Realty Stocks Lead the Decline

IT stocks suffered the most, with Infosys, Wipro, and HCL Technologies emerging as the top losers, dragging down the Nifty IT index.
Banking and financial stocks also faced selling pressure, contributing to the broader market weakness.
The real estate sector was impacted by rising bond yields, as investors shifted their focus to safer assets.