The first trading day of FY26 proved to be a disastrous one on Dalal Street, as the markets ended in a steep downturn amid growing concerns over the Trump administration’s impending reciprocal tariffs on imported goods. The S&P BSE Sensex plunged by nearly 1,400 points, while the NSE Nifty50 closed below 23,200, reflecting the widespread panic among investors. This marked a grim start to the new financial year, as uncertainty surrounding the tariffs triggered a massive sell-off, leading to underperformance in the Indian stock market compared to global indices.
Market Performance and Key Movers
The market's decline was sharp, with hardly any gainers to be found. Among the few stocks that managed to stay positive, IndusInd Bank stood out, rising over 5% on the back of reports of multiple deals with private banks. Trent also gained over 4.5%, while Jio Financial Services, Bajaj Auto, and Hero MotoCorp all saw modest gains of over 1%. However, these were outliers in an otherwise negative trading session.
On the downside, the biggest losers included prominent stocks like HCLTech, Bharat Electronics Limited (BEL), Bajaj Finserv, HDFC Bank, and Hindalco, which all saw significant declines, reflecting the broad-based sell-off in the market.
The Impact of US Reciprocal Tariffs
The primary catalyst behind this massive market reaction was the anticipated imposition of reciprocal tariffs by the US government, scheduled to come into effect on April 2. According to Prashanth Tapse, Senior Vice President at Mehta Equities Ltd, investors were jittery ahead of the tariff imposition, fearing that it would undermine India's competitive edge, particularly in sectors dependent on exports to the US. The tariff decision is expected to negatively impact India’s export-driven sectors, which constitute a major part of the country's economy, leading to heightened anxiety in the markets.
This uncertainty regarding global trade dynamics, particularly the US-China trade war, has significantly rattled investor sentiment. The market's reaction highlights the vulnerability of India's export-oriented industries, particularly in the wake of rising protectionist measures from major global players.
Technical Indicators and Market Sentiment
From a technical perspective, the market showed signs of weakness, with the index nearing key support levels. Rupak De, Senior Technical Analyst at LKP Securities, noted that the index had experienced a sharp decline and was approaching the 50-EMA (Exponential Moving Average) on the daily chart. De indicated that while the market had recently been consolidating, the 50EMA support could act as a crucial level to stabilize the market in the short term. However, he also warned of a potential downside risk if the market fails to hold these levels. A breakdown below 23,115 could result in a deeper correction, whereas a breakout above 23,250 might revive bullish sentiment.
Sector-Specific Performance
Certain sectors were more affected than others. The IT sector, in particular, bore the brunt of the sell-off due to its heavy exposure to the US market. With the looming threat of tariffs, analysts were concerned about the impact on India’s IT exports to the US, further exacerbating market fears. Vinod Nair, Head of Research at Geojit Investments, highlighted this vulnerability, emphasizing that the IT sector, coupled with rising oil prices, put additional pressure on market sentiment.
The real estate sector also faced a significant downturn, particularly after Maharashtra’s revision of its ready reckoner rates, which impacted property valuations. The uncertainty in the real estate market, along with rising costs for developers, led to a notable decline in property stocks, adding to the overall market weakness.
Domestic Factors and Volatility
While global factors, such as tariff uncertainty, were the main drivers of market volatility, domestic factors also played a role in influencing investor sentiment. Despite the sharp sell-off, there are still some positive factors at play that could provide support in the coming days. Nair pointed to potential domestic recovery drivers, such as expected earnings growth, the possibility of interest rate cuts by the Reserve Bank of India (RBI), and a moderation in valuations, which could help stabilize the market in the medium term.
However, the immediate outlook remains uncertain, as investors continue to monitor the situation closely, awaiting clearer guidance on the tariff issue and its possible impact on the Indian economy.
Outlook for Investors
Given the current volatility, market experts are advising a cautious approach. As Nifty slipped below its recent range and breached moving average support levels, analysts suggested that the next crucial support lies around 23,100 (20 DEMA). A breakdown below this level could trigger further weakness, while holding above it might offer a chance for recovery. Experts like Mishra recommend adopting a stock-specific trading strategy rather than chasing index positions, suggesting that investors stay alert and adjust their strategies based on market reactions to global developments.
In conclusion, the first day of FY26 has set a grim tone for the financial year, with uncertainty surrounding US tariffs, global trade dynamics, and domestic volatility clouding investor sentiment. While there is hope for stabilization due to potential domestic recovery drivers, the path ahead remains uncertain, and investors will need to stay vigilant in the coming days as the market tries to find its footing. The developments in global trade and the US-China relationship will likely continue to be major factors influencing the Indian market’s performance.
