Benchmark stock market indices on Dalal Street faced significant losses on Tuesday, falling by 1.5% as concerns about the impending reciprocal tariffs set to take effect from April 2 took a toll on investor sentiment. The S&P BSE Sensex dropped 1,390.41 points, closing at 76,024.51, while the NSE Nifty50 sank 353.65 points, settling at 23,165.70.
Key Drivers of Market Decline
The primary catalyst for the market's plunge was the looming threat of U.S. reciprocal tariffs, which are expected to impact global trade starting from April 2. Ajit Mishra, SVP of Research at Religare Broking Ltd, noted that the anticipation of these tariffs led to a negative opening for the market, with the downward momentum intensifying throughout the session. As the market digested the potential implications for global trade, particularly the impact on India’s export-driven sectors, selling pressure spread across multiple sectors, leading to widespread declines.
Sector-Specific Performance
IT stocks were among the worst hit, reflecting investor concerns about the potential negative impact of the tariffs on India’s IT exports to the U.S. The sector's heavy exposure to the U.S. market made it particularly vulnerable to the expected changes in trade dynamics. In addition to IT, real estate and financial stocks also experienced significant declines, with major companies in these sectors suffering notable losses.
The broader indices showed relative resilience compared to the benchmarks, with the Nifty Midcap100 falling 0.86% and the Nifty Smallcap100 slipping 0.70%. This reflected the broader negative sentiment that affected smaller and mid-sized companies, but the losses were less severe than those seen in the major sectors.
Market Movers
Among the few stocks that managed to stay positive, IndusInd Bank emerged as the top gainer on the Sensex, surging by 5.11%. Zomato also saw a modest gain of 0.27%. However, the rest of the market was predominantly bearish, with most stocks finishing in the red. HCLTech suffered the steepest decline, falling by 3.87%. Other major losers included Bajaj Finserv, which dropped 3.46%, and HDFC Bank, which tumbled 3.35%. Bajaj Finance and Infosys rounded out the top five losers, with declines of 2.81% and 2.73%, respectively.
Technical Outlook and Support Levels
The technical outlook for the market remains uncertain, with the Nifty50 testing key support levels. Mishra pointed out that the next crucial support lies around the 23,100 level (20 DEMA), and if the index falls below this, it could trigger further negative sentiment. Conversely, holding above this level may provide a foundation for a potential recovery. Given the mixed signals from global and domestic factors, Mishra advised a cautious approach to index positions and recommended focusing on stock-specific strategies rather than broad market plays.
Volatility and Investor Sentiment
The India VIX, which measures market volatility, surged by 8.37%, signaling increased uncertainty and heightened investor nervousness. The sharp rise in volatility is a clear indication that market participants are bracing for further turbulence, particularly as the U.S. tariff situation unfolds.
Domestic Factors Offering Some Hope
Despite the volatility and short-term challenges posed by the tariff imposition, some analysts remain optimistic about the medium-term outlook. Vinod Nair, Head of Research at Geojit Investments Limited, highlighted positive domestic factors such as the expected recovery in earnings growth, potential interest rate cuts by the RBI, and a moderation in valuations. These factors are likely to provide some stability and support for the market in the coming months, though much will depend on how global trade dynamics evolve.
In summary, the market’s decline on Tuesday was driven by concerns over U.S. reciprocal tariffs and their potential impact on India’s export-oriented sectors. While the immediate outlook remains uncertain, domestic factors such as earnings recovery and potential rate cuts from the RBI may provide some support, offering a glimmer of hope for investors amid the market turmoil. However, in the short term, volatility is likely to persist, and a cautious, stock-specific approach is recommended.
