Bears grip D-Street: Sensex tumbles 1,200 points, Nifty falls 1.5% amid IT, auto weakness, global concerns

1. Trade war fears: Market sentiment dampened following US President Donald Trump’s remarks on imposing additional tariffs, including a 10% levy on Chinese goods and a 25% tax on imports from Mexico and Canada. During the election campaign Trump criticized India as a “very big trade abuser,” sparking concerns of heightened US.-India trade tensions.

Nervousness persists among investors even as several economists say India may not be as badly hit by Trump’s moves. Morgan Stanley’s Chief Asia Economist, Chetan Ahya, noted that India is relatively insulated from tariff risks compared to other economies like China. “Structural tailwinds and the continuation of sound policy measures should mitigate tariff impacts,” he said, estimating that a 10% hike in tariffs could shave 30 basis points off India's growth.

2. US Fed signals no immediate rate cuts

Indian markets also reacted to US inflation data, which reinforced expectations of a cautious approach by the Federal Reserve on interest rate cuts. The Fed’s preferred inflation measure, the Core PCE Price Index, rose 2.8% year-on-year in October, dampening hopes for a rate cut. Elevated rates typically weigh on equities while benefiting non-yielding assets like gold.

Additionally, robust Q3 US GDP growth, supported by strong consumer spending and business investment, and unexpectedly high pending home sales data, further solidified the Fed's stance.

Markets were dragged down by heavyweight IT firms on resurgent uncertainties over the trajectory of US interest rate cuts.

3. Weakness in Chinese and other markets

Asian markets added to the bearish mood, with Chinese stocks leading declines as investors awaited further economic stimulus ahead of a critical policy meeting in Beijing. Hong Kong and mainland benchmarks fell sharply, contributing to an overall weaker regional outlook. China’s underperformance dashs hopes of any revival in fund flows into emerging market funds.

4. Sectoral Drags: Nifty IT index led the decline, down 2.4%, followed by Nifty Auto (-1.7%) and Nifty Financial Services (-1%). Nifty Private Bank slipped 1%, while Nifty Healthcare and FMCG fell 0.7% and 0.6%, respectively. On the gainers' side, Nifty PSU Banks rose 1%, and Nifty Media edged up 0.3%.

5. Investor sentiment also weakened as Russia launched a "massive strike" on Ukraine's energy infrastructure, according to BBC report. The coordinated assault, involving drones and missiles, hit multiple cities over several hours—the second such attack this month.