Black Monday on D-Street: Sensex plunges 700 pts as Trump tariffs among key factors to weigh on markets

1) Trump Tariffs Spark Global Trade Fears: Investor sentiment took a hit after Trump imposed fresh tariffs on Canada, Mexico and China over the weekend, levying 25 percent duties on Canada and Mexico and a 10 percent charge on China. The move has raised fears of retaliatory measures. Canada and Mexico quickly vowed countermeasures, while China said it would challenge the decision at the World Trade Organization (WTO).

"Trump may use tariffs as a political tool again, targeting countries over non-trade issues," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

2) Modest Infrastructure Spending in Budget Disappoints Investors: Infrastructure-related stocks bore the brunt of selling pressure, with the sectoral index slipping up to 2.3 percent. Market participants were unimpressed by the modest hike in capital expenditure announced in the Union Budget, dampening hopes of a stronger fiscal push. Shares of L&T declined 4.42 percent. UltraTech, the country's largest cement maker by capacity were down nearly 2 percent. Ircon International shed over 5 percent.

Stock Market LIVE Updates

3) Rupee Hits Record Low Against Dollar: The Indian rupee weakened past the 87 per U.S. dollar mark for the first time, tracking losses in other Asian currencies after Trump’s tariff announcement. The local unit dropped 0.5 percent to an intraday low of 87.07, with traders expecting further depreciation amid strong dollar demand.

The focus is now expected to shift to corporate earnings and the upcoming RBI MPC outcome on February 7. Market participants will closely monitor the policy review for any indications of further monetary support, following the recent liquidity measures. Major earnings announcements will also be in focus. Additionally, FII flows and other global cues will remain key factors.

4) Rise in Dollar Index Adds to FII Selling Pressure: The U.S. dollar index surged over 1 percent, crossing the 109.6 mark, as Trump's tariff moves fueled demand for the safe-haven currency. A stronger dollar is likely to trigger further selling by foreign institutional investors (FIIs), adding to market weakness and weighing on sentiment.

5) Mixed Q3 Earnings Keep Investors Cautious: Corporate earnings for the third quarter have been a mixed bag, with several companies reporting margin pressures amid rising costs. Management commentaries across industries remain cautious, indicating that business conditions may remain challenging in the coming quarters, keeping investors on edge.

What Technical Analysts suggest?

Ajit Mishra – SVP, Research, Religare Broking Ltd noted, from a technical perspective, Nifty tested the crucial resistance of its 200-day exponential moving average (DEMA) in the final session. Going ahead, a decisive move above 23,650 could pave the way for further recovery toward the 23,900–24,200 zone, while on the downside, support at 23,000–23,300 will be critical to hold. Given the ongoing market recovery, sectoral trends are expected to remain mixed, with rate-sensitive and consumption-linked stocks likely to stay in focus. However, traders should maintain a balanced approach and avoid getting carried away by short-term movements.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.