Sensex falls 850 pts from day's high, Nifty below 22,050: US tariff risks among key factors weighing on markets

Sensex drops over 850 pts from day's high, Nifty at 22,000 range as US trade threats among other factors weigh

Sensex and Nifty began the trade on a positive note on Monday but soon turned negative amid heavy selling in blue chip stocks, including Reliance Industries and HDFC Bank as well as persistent outflow of foreign funds.

Sensex climbed 451.62 points to 73,649.72 in early trade, while the Nifty went up by 136.85 points to 22,261.55. However, soon both the benchmark indices turned negative and were trading sharply lower.

The BSE benchmark fell 852.68 points from day's high to hit day's low of 72,797.04, and the Nifty  fell 252.3 points from day's high.

IndusInd Bank, HDFC Bank, Reliance Industries, Axis Bank, Bajaj Finserv, Tata Steel, Adani Ports, Tata Motors, Zomato, Bajaj Finance and Hindustan Unilever were among the biggest laggards.

Here are the key possible factors that led to quick reversal in trend intraday: 

1) Global Trade War Fears: 25 percent tariffs on Canada and Mexico by the United States will come into effect on March 4. U.S. President Donald Trump has also threatened China with the extra 10 percent duty, resulting in a cumulative 20 percent tariff. Reuters quoting China's state-controlled Global Times has reported that Beijing is also preparing countermeasures against fresh U.S. import tariffs set to take effect on Tuesday.

2) GDP below estimates: GDP growth for the third quarter of the current fiscal (FY25) was 6.2 per cent. The rise comes after GDP growth fell to a seven-quarter low of 5.4 per cent in Q2FY25. However, the rise was still below expectations as a Moneycontrol survey of 19 economists said that the Indian economy is expected to grow at a faster pace of 6.3 percent amid capex push and uptick in rural spending. The GDP growth stood at 8.6 per cent in Q3FY24.

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3) Unabated FII selling: Foreign Institutional Investors (FIIs) offloaded equities worth Rs 11,639.02 crore on Friday. Foreign investors have pulled out Rs 34,574 crore from the Indian equity markets in February pushing total outflows to Rs 1.12 lakh crore in the first two months of 2025 amid rising global trade tensions and concerns over corporate earnings growth. "Elevated valuations of Indian equities, alongside concerns about corporate earnings growth, have led to a sustained outflow of FPIs," Vipul Bhowar, Senior Director - Listed Investments, Waterfield Advisors, told PTI.

Cautious sentiment prevails in the markets, influenced by U.S. tariff uncertainty in the absence of any significant positive domestic trigger, said Hardik Matalia, analyst at Choice Broking told Reuters.

4) No Ukraine deal: The absence of a breakthrough in Ukraine peace talks has kept market sentiment fragile. Investors remain wary of prolonged geopolitical tensions, which could lead to higher crude oil prices and further strain emerging markets.

5) Weak Domestic Data Adds to Pressure: On the domestic front, India’s factory activity slowed to a 14-month low in February, with the manufacturing PMI falling to 56.3 from 57.7 in January. The softer expansion in new orders and production suggests that demand may be cooling.

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