The Indian benchmark indices, Nifty50 and Sensex, recorded a sharp decline on Friday, amid concerns over US tariffs, persistent Foreign Institutional Investor (FII) selling, and weak global cues.
The Sensex fell 1.97 per cent, or 1,471 points, reaching an intraday low of 73,141, before closing at 73,198 with a loss of 1,414 points. The Nifty50 slipped 1.95 per cent, or 440 points, to an intraday low of 22,105, eventually settling 420 points lower at 22,125. Among the worst-performing stocks on the NSE and BSE were IndusInd Bank (down 6.18 per cent), Tech Mahindra (5.83 per cent), M&M (4.27 per cent), and HCLTech (3.69 per cent). Infosys, M&M, Bharti Airtel, TCS, and HCLTech were the top contributors to the decline.
V K Vijayakumar, chief investment strategist at Geojit Financial Services, attributed the market volatility to uncertainty following Donald Trump’s election as US president.
“Stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected US president. The spate of tariff announcements by Trump has been impacting markets, and the latest announcement of an additional 10 per cent tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favourable to the US,” he said.
Vijayakumar also noted the potential market impact of China’s response, stating, “How China responds to the latest round of tariffs remains to be seen. Even now, the markets have not discounted a full-blown trade war between the US and China. It is likely to be avoided. However, the uncertainty element has increased, as reflected in the sharp spike in the CBOE volatility index to 21.13.”
Ajit Mishra of Religare Broking highlighted concerns over market conditions, commenting, “The past two sessions reflect indecision, likely due to oversold conditions. However, rotational selling across key sectors is not only limiting the rebound but also gradually dragging the index lower.”
Despite the downturn, Vijayakumar projected a recovery in March, stating, “March is likely to witness a recovery in the Indian market, backed by better macro news flows and subdued FII selling. Since large-cap valuations are fair, and in pockets attractive, FIIs are unlikely to press selling as aggressively during the last few months. Long-term investors can utilise the weakness in the market to slowly accumulate fairly-valued quality large caps and select fairly-valued stocks in the broader market, like defence stocks, for instance.”
US President Donald Trump announced on Thursday that proposed tariffs on Mexico and Canada would take effect on March 4, alongside an additional 10 per cent tariff on Chinese imports.
The 25 per cent tariffs on imports from Mexico and Canada had been delayed for a month, with the pause expiring on February 3. Trump confirmed the tariffs would be enforced, citing concerns over illegal drug trafficking. He also confirmed that the previously scheduled Reciprocal Tariff date of April 2 remained unchanged.
The MSCI February 2025 rebalancing, effective after Friday’s session, is expected to generate passive inflows of approximately $1 billion.
Broader market indices also witnessed declines, with the Nifty SmallCap index falling 2.09 per cent to an intraday low of 14,839.30 and the Nifty MidCap index slipping 1.89 per cent to 48,203.75.
Sectoral losses were led by Nifty Metal, Realty, Auto, and Media indices, each dropping up to 2.5 per cent. The PSU Bank, IT, and Consumer Durables sectors also recorded declines of up to 1.5 per cent.
Foreign Institutional Investors (FIIs) offloaded shares worth Rs 556.56 crore, while Domestic Institutional Investors (DIIs) net purchased shares totalling Rs 1,727.11 crore on February 27. Year-to-date, FIIs have sold equities worth Rs 1,13,721 crore, with Rs 78,027 crore offloaded in January and Rs 35,694 crore sold in February.
Global markets followed suit, with the Asia-Pacific region trading lower on Friday. The Nikkei declined 2.81 per cent, the Topix slipped 1.87 per cent, the ASX 200 fell 1.03 per cent, and the Kospi dropped 2.74 per cent. CSI 300 traded 0.6 per cent lower.
In the US, all three major indices ended in the red. The S&P 500 lost 1.59 per cent to close at 5,861.57, the Nasdaq Composite fell 2.78 per cent to 18,544.42, and the Dow Jones dropped 193.62 points, or 0.45 per cent, to 43,239.50. Nvidia’s 8.5 per cent decline weighed on the Nasdaq, while Bitcoin’s price fell 1.79 per cent to $82,811.12, reflecting a nearly 25 per cent decline from its January peak.
Market analysts identified key technical levels, with Jigar S Patel, senior manager of equity research at Anand Rathi, highlighting 22,000 as crucial support and 22,500 as resistance for Nifty.
“A strong breakout above 22,500 could push the index towards 22,800. The short-term trading range is expected between 22,000 and 22,800. Additionally, a bullish butterfly pattern has formed near 22,300, indicating a potential reversal. If the pattern plays out, it could support a bullish move, with 22,500 acting as a crucial breakout level. Traders should monitor price action near these levels, as a decisive move beyond resistance may confirm further upside momentum,” Patel said.
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