Sensex falls 500 pts, Nifty below 22,750: US tariff concerns among key factors behind market decline for 4th session

Sensex down over 400 pts, Nifty below 22,800: Tariff threats among key factors keeping markets in red for 4th straight session

Sensex and Nifty declined on February 21, extending their losing streak to a fourth straight session amid persistent foreign fund outflows and concerns over potential US tariffs.

Sensex tumbled 535.87 points or 0.70 percent to an intraday low of 75,200.09, while the Nifty slipped 179.85 points or 0.78 percent to 22,733.30. Weakness in frontline stocks such as Mahindra & Mahindra, UltraTech Cement, Infosys, Tata Motors, ICICI Bank, and Maruti Suzuki dragged down the key indices.

Key Factors Pressuring Markets

1) Trump’s Tariff Threats: Investor sentiment took a hit after US President Donald Trump reiterated his stance on imposing a reciprocal tariff on all imports. The pharmaceutical and automobile sectors, key exporters to the US, could face disruptions if such tariffs are imposed.

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, noted that markets are responding negatively to the potential impact on these industries while shifting focus towards domestic consumption-driven stocks. "However, this could be a short-term trend as Trump’s strategy typically involves threatening tariffs before negotiating reductions," he added.

2) Persistent FII Selling: Foreign institutional investors (FIIs) continued to offload equities, selling shares worth Rs 3,311.55 crore on Thursday, according to exchange data. The total FII outflow for the year has now reached Rs 98,229 crore. Analysts believe sustained FII selling is putting pressure on large-cap stocks, especially with broader market valuations still appearing stretched despite recent corrections.

Adding to investor concerns, mixed earnings in the second and third quarters and a strengthening US dollar have further weighed on sentiment.

3) Renewed Interest in Chinese Equities: China’s stock markets are witnessing renewed buying interest. The Hang Seng index surged over 3 percent on Friday as investors found valuations in Chinese equities more attractive. A key development was Chinese President Xi Jinping’s rare meeting with top technology leaders, including Alibaba founder Jack Ma, where he urged companies to “show their talent” and be confident in China’s economic model. The move is seen as a step to restore business confidence amid concerns over slowing growth and US-led restrictions on China’s tech sector.

"The FII selling in India may persist as investors look towards China, where stocks are relatively cheap and showing signs of recovery," Vijayakumar said.

4) Rising Crude Oil Prices: Crude oil prices extended their gains for a third straight session, raising concerns for Indian markets. Brent crude futures settled higher on Thursday amid worries over supply disruptions in Russia. Higher crude prices negatively impact India’s trade balance as the country is a major oil importer. Rising oil costs can fuel inflation, prompting tighter monetary policy and affecting corporate earnings, particularly in sectors like aviation, logistics, and oil marketing companies.

5) Diminishing Hopes of Fed Rate Cuts: Expectations of multiple interest rate cuts by the US Federal Reserve this year have weakened following stronger-than-expected inflation data in the US. With consumer prices rising more than anticipated in January, the likelihood of the Fed maintaining higher rates for longer has increased.

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said, “Concerns over Wall Street’s overnight drop, Trump’s tariff threats, persistent US inflation, and the Fed’s cautious stance on rate cuts have contributed to market volatility.”

Technical Outlook

Anand James, Chief Market Strategist, Geojit Financial Services, stated that caution remains dominant in the market. “We have not yet seen clear signs of an immediate downside break towards the 21,800-21,300 zone. However, a rebound attempt towards 23,150-23,200 could still be on the cards before a stronger directional move emerges,” he noted.

This is the biggest single-day fall for M&M stocks in nearly 7 months. The Nifty Auto index was down 2.5 percent at 21,534. Tata Motors, M&M, Hyundai Motor India, Maruti Suzuki and Bajaj Auto were among the major losers. The Nifty Auto index has tanked almost 6 percent since the start of the year.

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