Sensex Plunges 700 Points from Day’s High, Nifty Slips Below 22,500 Amid Global Market Turmoil

Sharp Decline in Wall Street Futures, Trade War Concerns Weigh on Domestic Equities

Indian stock markets witnessed a sharp sell-off on Monday, as benchmark indices Sensex and Nifty 50 erased early gains to close in negative territory. The selloff was driven by weak global cues, a sharp decline in U.S. stock futures, and renewed concerns over trade tensions between major economies.

The BSE Sensex dropped 709.32 points from its intraday high, touching a low of 74,031.93, while the Nifty 50 slipped below the 22,500-mark, hitting a low of 22,429.05. Investors opted for profit-booking, amid concerns over increasing macroeconomic risks and uncertainties in the global financial landscape.

Market analysts attributed the downturn to multiple external factors, including the steep decline in U.S. stock futures, weak Asian market cues, and fears of a new wave of protectionist policies from the United States, which could have implications for India’s export-driven industries.

Market Movers: Factors Driving the Decline

1) U.S. Stock Futures Slump Ahead of Market Opening

• Wall Street futures signaled a volatile trading session, with major indices experiencing sharp declines before market opening.
• Dow Jones futures dropped by more than 400 points, while the S&P 500 futures slumped by over 60 points.
• Nasdaq futures were down more than 250 points, indicating a weak start for U.S. tech stocks.
• Investor sentiment turned cautious after former U.S. President Donald Trump, in an interview with Fox News, suggested that the economy was undergoing a “period of transition”, adding to concerns over future fiscal and monetary policy decisions.

The fall in U.S. stock futures created spillover effects in global markets, with investors reassessing their risk exposure.

2) Trade War Concerns Resurface, Impacting Export-Oriented Sectors

• The United States Department of Commerce announced a 25% tariff on steel and aluminum imports, set to take effect from Wednesday.
• The move has raised apprehensions about reciprocal tariffs being imposed on Indian exports, particularly in metals, automobiles, pharmaceuticals, and textiles.
• Indian companies with significant U.S. exposure could face margin pressures, as the tariff imposition may result in higher costs and potential loss of market share.

Market participants are particularly concerned about the long-term trade outlook, as tensions between the United States and major trading partners continue to escalate.

“The lack of clarity regarding which sectors will be affected by these tariffs is a major concern. Investors are shifting their focus towards domestic consumption-driven stocks, while export-oriented sectors like IT, metals, and pharmaceuticals are likely to experience increased volatility,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

3) Weakness in Asian Markets Adds to Bearish Sentiment

• Asian equity markets mirrored the negative trend, further impacting investor sentiment in India.
• Hong Kong’s Hang Seng index led regional declines, slipping 1.8% to 23,800.44, amid growing concerns over China’s economic recovery.
• The Shanghai Composite index dropped 0.2% to 3,366.16, following weak inflation data.
• China’s consumer prices declined in February, marking the first deflationary trend in 13 months, a sign of sluggish domestic demand in the world’s second-largest economy.

The broader Asian market weakness contributed to the selloff in Indian equities, as foreign institutional investors (FIIs) remained on the sidelines, awaiting clarity on global monetary policies and trade developments.

4) Profit-Booking in Heavyweight Stocks Amid Volatility

• Investors locked in gains in select large-cap stocks, particularly in sectors that had seen significant rallies in the past few weeks.
• Financial, IT, and automobile stocks bore the brunt of selling pressure.
• HDFC Bank, Reliance Industries, TCS, and Infosys were among the key drags on the Sensex and Nifty.
• Volatility in the derivatives segment also contributed to the intraday fluctuations, with traders opting for cautious positioning ahead of key economic announcements.

5) FII Activity and Currency Fluctuations Add to Market Jitters

• Foreign institutional investors (FIIs) turned net sellers amid concerns over global economic stability and interest rate expectations.
• The Indian rupee depreciated against the U.S. dollar, further adding to market volatility.
• A weaker rupee increases import costs, particularly for sectors such as oil and gas, consumer goods, and electronics, potentially impacting corporate profit margins.