Indian Markets Drop Amid US Tariff Impact Globally

The Indian equity markets witnessed a decline on February 3, 2025, following a global market downturn triggered by US President Donald Trump’s announcement of new tariffs on key trading partners, including Canada, Mexico, and China. The broad-based sell-off in global equities weighed heavily on investor sentiment, leading to moderate losses in Indian benchmarks and sharp corrections in mid- and small-cap stocks.

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Market Performance on February 3, 2025

Indian Markets at Close

• NSE Nifty 50 fell 0.52% to 23,361.05
• BSE Sensex dropped 0.4% to 77,192.86

The impact of the tariff announcement was felt across global markets, leading to broad-based selling in equities.

Global Market Reaction

The ripple effects of Trump’s tariff move were evident in the US, European, and Asian markets:

• US Markets (Futures Movement)
  • Dow Jones Industrial Average Futures declined 1.22% (down 546 points)
  • S&P 500 Futures fell 1.4%
  • Nasdaq-100 Futures dropped 1.7%
• European Markets
  • Major indices across Europe fell over 1% as investors reacted negatively to the news.
• Asian Markets
  • Japan’s Nikkei 225 plunged 2.5%
  • South Korea’s Kospi fell 2.9% to 2,443.57
  • Hong Kong’s Hang Seng declined 1.4% to 19,942.54
  • Shanghai Composite Index edged lower to 3,250.60

The widespread sell-off was primarily fueled by fears that a renewed tariff war could stifle global trade and economic recovery.

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Domestic Market Factors

Indian markets opened in the red and saw choppy trading throughout the session. The federal budget announcement, which had provided some temporary relief, failed to lift investor sentiment as global cues remained negative.

Key Domestic Market Trends:

1. Post-Budget Reactions
   • Consumer stocks rallied as a personal income tax cut announced in the budget boosted optimism about increased disposable income.
   • Infrastructure stocks saw selling pressure as investors were disappointed with the FY26 investment outlay.
2. Mid- and Small-Cap Stocks Take a Hit
   • The bearish undercurrent triggered massive selling in mid-cap and small-cap stocks.
   • Investors were concerned about the impact of trade tensions on the broader economy.
3. Sector-Wise Performance
   • FMCG and automobile stocks saw heavy selling as concerns over higher tariffs affected investor sentiment.
   • IT and pharma stocks remained relatively resilient, benefiting from a weaker rupee.
4. Rupee Depreciation Raises Concerns
   • The rupee breached the 87 per dollar mark, raising worries about continued foreign investor outflows.
   • A weaker rupee makes imports costlier and could impact inflation.

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What Triggered the Global Sell-Off?

Trump’s Tariff Announcement

President Donald Trump’s decision to impose new tariffs on China, Mexico, and Canada sent shockwaves through the global financial system. The move is widely seen as part of Trump’s aggressive trade policies, which previously led to major market disruptions during his first presidency.

Impact on Global Trade & Economy

• Tariffs could disrupt supply chains, leading to increased costs for businesses.
• Investors fear retaliatory measures from China and other affected nations.
• Weaker global growth projections due to trade barriers could weigh on equity markets.

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Outlook for Indian Markets

Going forward, Indian markets will remain highly sensitive to global developments, especially:

1. Further Tariff Announcements
   • Any additional tariff escalation could trigger further sell-offs in global equities.
2. Foreign Institutional Investor (FII) Activity
   • A weaker rupee and continued FII selling could put pressure on Indian stocks.
3. Sector Rotation
   • Investors may shift towards defensive sectors like pharma, IT, and FMCG to hedge against volatility.
4. Macroeconomic Indicators
   • Inflation data, GDP growth, and government policy measures will play a crucial role in market direction.

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Final Thoughts

The Indian stock market, along with global indices, is currently navigating uncertainty as investors weigh the impact of Trump’s tariffs on global trade. While short-term volatility may persist, long-term investors should focus on fundamentals and sectoral strengths to make informed decisions.

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