India’s benchmark indices, Sensex and Nifty, opened lower on February 20, tracking losses in Asian markets as investors grew wary of U.S. tariff measures and their potential inflationary impact. Worries over slowing earnings growth, expensive valuations, and uncertain U.S. trade policies fueled selling pressure in equities.
At 9:20 AM, Sensex fell 290 points or 0.4 percent to 75,650, while Nifty dropped 65 points or 0.3 percent to 22,867. On the NSE, 654 stocks advanced while 984 declined. So far in 2025, Indian indices have lost over 3 percent and are down as much as 13 percent from their record highs in late September.
On February 19, Trump announced plans to impose tariffs of 25 percent or more on auto, pharmaceutical, and semiconductor imports. Among Asian economies, South Korea and Japan have the highest U.S. exposure to auto exports, while India has extensive exposure to the U.S. pharma market.
"Over the past three days, there has been some respite in our markets, but no clear sign that we’ve moved on to better times," said Aishvarya Dadheech, Founder & CIO of Fident Asset Management. "We’ve been holding around 22,800 for quite some time, and with the quarterly earnings season mostly over, the only major event left is clarity on reciprocal tax policies."
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He cautioned that an unfavourable tax decision could weigh on sentiment, but beyond that, there is no immediate trigger to drive the market decisively in either direction.
"One key indicator I’m watching is SIP data. In January, we saw a significant increase in SIP cancellations. If this trend leads to rising redemptions, broader markets could face more pressure. February’s mutual fund data will be crucial in assessing this trend."
In the broader market, both the BSE Smallcap and BSE Midcap indices declined by 0.4 percent. The broader mid-cap and small-cap indices have fallen 17 percent and 21 percent, respectively, from their record highs.
"I wouldn’t be surprised if mid- and small-cap indices drop another 10 percent from current levels over the next month," Dadheech said. "Mid-cap valuations remain stretched, while small-cap valuations, though not at extreme levels anymore, are still not cheap."
"I expect small caps to see more limited downside, while mid caps could face slightly more pressure due to their higher FII exposure and valuation concerns. If macro risks intensify—such as weaker GDP growth or increased global risk-off sentiment—mid and small caps could face additional headwinds," he added.\
Also Read | Nomura forecasts a modest 4% upmove in Nifty 50 by year-end
Meanwhile, the minutes of the U.S. Federal Reserve’s January policy meeting indicated that officials were concerned about the inflationary effects of Trump’s proposed tariffs, hinting at the possibility of keeping interest rates higher for longer.
Higher U.S. interest rates typically make emerging markets like India less attractive to foreign investors. So far in February, foreign institutional investors (FIIs) have offloaded Rs 30,216 crore worth of Indian equities, while domestic institutional investors (DIIs) have bought shares worth Rs 35,809 crore.
When it comes to sectoral performance, financials and FMCG stocks weighed on the Nifty 50, while gains in oil & gas and IT stocks provided some support.
Among the top gainers on the Nifty 50, Cipla, BEL, NTPC, Hindalco, and Shriram Finance rose 1-2 percent. On the downside, HUL, M&M, ITC, Maruti, and HDFC Bank were the biggest laggards, slipping 1-1.6 percent.
RateGain shares surged nearly 7 percent after Thailand-based Nok Air partnered with AirGain to enhance its pricing strategies. Palantir Technologies shares tumbled 10 percent after reports emerged that U.S. Defense Secretary Pete Hesgeth plans to cut military spending.
From a technical standpoint, Nifty's upside target remains 23,150. However, if it fails to break above 23,300, a decline toward the 21,800–21,300 zone is still on the cards, said Anand James, Chief Market Strategist at Geojit Financial Services.
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