Indian equities markets experienced a sharp fall on Monday, their worst start to the year since the outbreak of the Covid-19 pandemic. Investor sentiment was shaken by increasing prospects of a global trade war after former US President Donald Trump shocked markets with the surprise announcement of tariffs on all trading partners.
Sensex, Nifty Tumble Nearly 5%
The Sensex plummeted 3,939.68 points, opening at 71,425.01, while the Nifty plummeted 1,160.8 points to reach 21,743.65, both the indices plummeting almost 5% in early trade. This sharp fall came after a huge sell-off in international markets, including Wall Street and major Asian indices such as Japan, Singapore, and China.
IT, Metal Stocks Among Worst Hit
Industries that rely greatly on US markets suffered the most. Stocks of top IT companies—like HCL Technologies, Tech Mahindra, Infosys, Tata Consultancy Services, and Reliance Industries—dropped steeply. Tata Steel crashed more than 8%, and Tata Motors dropped over 7%. Engineering and construction giant Larsen & Toubro also declined significantly.
Global Repercussions of Trump’s Tariff Bomb
The rout in the market started following Trump’s sweeping tariff declaration, sending alarm bells ringing about a possible global recession. Nations such as China, Canada, and Mexico are already preparing to strike back, raising fears of a long-term trade war.
“Both China and Japan indices fell by 10 per cent and 8 per cent, respectively. This raises the stakes of the current trade war and fears of a possible global recession that would impact all,” said Vikas Jain, Head of Research at Reliance Securities, in a statement to PTI.
He further stated, “On Friday, the US S&P 500 fell by 6 per cent, and the Dow Jones dropped over 2,000 points, its worst week since the COVID-19 crisis. This followed China’s move to impose reciprocal 34 per cent tariffs on all US imports from April 10.”
Inflation and Profit Pressures Loom
The bilateral tariff increases by both the US and China are poised to push up inflation while slowing down global economic growth. As input prices continue to rise, businesses might soon experience diminishing profit margins at a time when earnings season begins.
“Higher tariff rates will push numerous companies to increase prices or take lower margins,” cautioned Goldman Sachs analysts. “We anticipate negative revisions in consensus profit margin expectations in upcoming quarters.”
The company also mentioned, “We anticipate in future quarterly earnings calls fewer companies than normal will give forward guidance on 2Q as well as full-year 2025.”
The effect of tariffs might begin to appear in economic statistics shortly. US consumer inflation data, which is to be released later this week, should show a 0.3% rise for March. But analysts warn that this might be the start of a sharper climb in prices for common items.
Federal Reserve Chairman Jerome Powell also had his say, stating Trump’s new tariff policy is “bigger than anticipated,” and that “the economic effect on inflation and growth will be likely,” suggesting an uncertain future for the US economy.
Nasdaq Enters Bear Market
Following the global chaos, the Nasdaq index officially fell into bear market territory on Friday. Oil prices and other major commodities also plummeted after Trump’s tariff announcement, further deteriorating investor sentiment.
