Sensex closes 262 pts lower on global weakness after Trump escalates trade threats

The market closed sharply lower on Tuesday following correction in its global counterparts after the US President Donald Trump threatened to impose fresh tariffs on China.

All sectoral indices closed in the red with the Auto, IT, Metal, PSU Bank and Realty indices falling 1-2 percent.

The 30-share BSE Sensex shed 261.52 points to 35,286.74 and the 50-share NSE Nifty slipped 89.40 points to 10,710.50, dragged by Reliance Industries and Infosys.

"A trade war could significantly affect markets globally and cause prolonged pressure on indices worldwide. The US imports close to $500 billion worth of goods from China whereas the latter only $150 billion from the US. This could give Trump considerable bargaining power, and this issue might not be resolved in the near term," Nikhil Kamath, Co-Founder, Zerodha told Moneycontrol.

He said domestically FIIs continued to be net sellers, and the momentum is turning towards the bearish side again. "We would advocate entering fresh shorts at this juncture."

Global markets traded significantly lower as investors remained cautious due to ongoing trade war tensions between the world's largest economies US and China. France's CAC and Germany's DAX were down more than a percent at the time of writing this article.

China's Shanghai Composite was the biggest loser among major global equity markets, falling 3.82 percent after the US President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods. Hong Kong's Hang Seng closed down 2.8 percent and Japan's Nikkei lost 1.8 percent.

Brent crude futures also traded lower, falling half a percent to $74.95 a barrel on trade tensions and ahead of likely increase in output in the OPEC meeting later in the week.

Meanwhile, the Indian rupee was also under pressure, falling 40 paise to 68.38 against the dollar on sustained demand for the American currency from importers and banks amid lower local equities.

"Consolidation in oil price in expectation of gradual increase in output ahead of OPEC meet may provide some support to INR," Vinod Nair, Head of Research, Geojit Financial Services said.

The Nifty Midcap index underperformed frontliners, falling more than a percent. About three shares declined for every shares rising on the BSE.

ICICI Bank stock closed flat after the news that the board appointed Sandeep Bakhshi as Chief Operating Officer (COO) of the bank priced in. The stock had rallied 3.6 percent on Monday.

Oil retailers IOC, HPCL and BPCL fell 2-3 percent on rise in crude oil prices in previous session.

Index heavyweights Reliance Industries and Infosys dropped 2 percent each while ITC (up 0.6 percent), HDFC Bank (0.22 percent) and HDFC (0.24 percent) capped market losses.

Vedanta, M&M, IndusInd Bank, SBI, Adani Ports, L&T, Maruti Suzuki, Tata Motors, Kotak Mahindra Bank and Bajaj Finserv were down 1-3 percent whereas Bajaj Finance and GAIL gained more than a percent.

Borosil Glass Works shares rallied nearly 15 percent after board approved the issue of bonus shares in the ratio of 3:1 while C&C Constructions was locked at 5 percent upper circuit on settlement with SBI.