Equity markets witnessed a heavy sell-off on Monday, with benchmark indices crashing over 5 percent in early trade, tracking a global rout sparked by reciprocal tariffs announced by the US and the retaliation by China.
Additionally, fears of a looming recession in the world’s largest economy dented the investor sentiments worldwide. Investor wealth worth nearly Rs 16 lakh crore was wiped out in a matter of hours in April 7 trading session.
Sensex crashed 2,226.79 points or 2.95 percent to settle at 73,137.90, recording its third day of decline. During the day, the index slumped 3,939.68 points or 5.22 percent to 71,425.01. The NSE Nifty tumbled 742.85 points or 3.24 percent to settle at 22,161.60. Intra-day, the benchmark dropped 1,160.8 points or 5.06 percent to 21,743.65.
All 30 constituents of the Sensex were trading in the red. Tata Steel led the decline with a drop of over 10 percent, followed by Tata Motors, which fell over 9 percent. Heavyweights such as Infosys, HCL Tech, Tech Mahindra, Reliance Industries, TCS and L&T also witnessed sharp losses.
Key triggers behind the market collapse
1) Tariff tensions escalate: US President Donald Trump’s latest round of tariff hikes and China's retaliatory measures triggered panic across global markets. Trump, defending the tariff move, said countries were "dying to make a deal" and brushed off market pain as temporary. "Sometimes you have to take medicine to fix something," he said.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "Markets are going through extreme volatility driven by deep uncertainty. No one knows how this tariff turmoil will evolve, and that is keeping investors on edge globally."
2) Recession concerns deepen: Goldman Sachs has revised its forecast, putting the chances of a US recession at 45 percent in the next 12 months, up from its earlier estimate of 35 percent. JPMorgan Chase has gone a step further, warning that the US economy may enter a recession this year itself.
Vikas Jain, Head of Research at Reliance Securities, pointed out that both China’s and Japan’s benchmark indices have fallen 10 percent and 8 percent respectively, signalling broader concerns. "The US S&P 500 dropped 6 percent on Friday, while the Dow Jones fell over 2,000 points — its worst performance since the COVID-19 crisis. China’s decision to impose a 34 percent reciprocal tariff on all US imports starting April 10 has only made matters worse," he told PTI.
3) Global sell-off weighs on sentiment: Equities across Asia mirrored the panic on Wall Street. Hong Kong’s Hang Seng tanked nearly 11 percent, Tokyo’s Nikkei 225 dropped 7 percent, Shanghai Composite lost over 6 percent and South Korea’s Kospi fell 5 percent. Japanese stock futures had to be halted briefly in early trade after hitting lower circuit limits.
On Wall Street, the S&P 500 shed 5.97 percent, Nasdaq slumped 5.82 percent and the Dow Jones Industrial Average dropped 5.50 percent on Friday.
4) India VIX shoots up: The volatility index or India Vix rose 57 percent to 21.62 on Monday as investors brace for higher uncertainty or risk over the short term.
Technical view
Anand James, Chief Market Strategist at Geojit Financial Services, said the Nifty breaking below the 21,800 level confirms the weakening of earlier support zones. “We had not anticipated a breakdown below 21,800 so soon, expecting levels like 22,730–22,522 to hold. But the gap-down open has cut through these levels sharply,” he noted.
“Today’s move has taken the index from +2 standard deviation to -2 standard deviation in under 10 days — a rare technical occurrence. While a recovery towards 22,165 or even 22,522 is possible, the odds will depend on how the second half of today’s session unfolds,” he added.
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