Benchmark indices Sensex and Nifty tumbled on Tuesday, declining over 1 percent as investor sentiment took a hit from multiple global and domestic triggers. US President Donald Trump’s tariff threats targeting BRICS nations, weak Q3 earnings, and persistent foreign institutional investor (FII) selling weighed on the markets. Realty and consumer durable stocks led the fall.
The BSE Sensex dropped 1,431.57 points or 1.89 percent to 75,641.87. The NSE Nifty shed 367.9 points or 1.60 percent at 22,976.85. Nifty fell below 23,000 for the first time since June 7, 2024.
Volatility in global markets, coupled with mixed earnings reports, added to the bearish mood, with India VIX rising over 5 percent during the session.
Here are the key factors driving the market decline:
1) Trump’s Tariff Threats on BRICS Nations: President Donald Trump’s remarks targeting BRICS countries rattled investors. On Monday, Trump reiterated his intention to impose 100 percent tariffs on nations reducing their reliance on the US dollar for global trade. Speaking at the Oval Office, he warned, “As a BRICS nation... they’ll face a 100% tariff if they think about continuing their de-dollarization efforts.”
India, a key member of BRICS, is particularly vulnerable to this development. An aggressive stance by the US president could impact India’s trade dynamics and trigger broader market anxiety. Additionally, Trump announced plans to impose 25 percent tariffs on imports from Canada and Mexico starting February, further heightening concerns over global trade disruptions. Prashant Tapse, Senior Vice President of Research at Mehta Equities, noted, “Trump’s tariff decisions remain a wildcard for Indian markets. The uncertainty around his stance on India has kept investors cautious.”
2) Weak Q3 Earnings: Mixed corporate earnings added to market jitters. Shares of Dixon Technologies plunged 14 percent after reporting a sequential decline in consolidated net profit and revenue for the December quarter. Similarly, Zomato tumbled 9 percent after its Q3 results showed Blinkit’s aggressive expansion eating into profitability.
From the realty sector, Oberoi Realty slipped 7.6 percent after posting numbers below market expectations. The disappointing results underscored concerns over growth in key sectors, dampening investor confidence.
3) Bank of Japan Rate Hike Expectations: Global markets were also unnerved by expectations of an interest rate hike by the Bank of Japan (BOJ) on Friday which could impact borrowing costs globally. A hike by the BOJ would be the first since July last year when the move, coupled with weak U.S. jobs data, shocked traders and triggered a rout in global markets in early August.
Persistent FII outflows continued to weigh heavily on Indian equities. The upcoming Union Budget has added another layer of uncertainty, with investors adopting a wait-and-watch approach ahead of potential policy announcements.
Ruchit Jain, Vice President at Motilal Oswal Financial Services, said, "The India VIX has risen over 5% today indicating increased uncertainty ahead of the Union Budget. FIIs continue to be sellers in the Indian market where they have sold equities worth over 50000 crore which remains the prime reason why we are witnessing markets tumbling post a pullback move."
Major laggards in the 30-share Sensex pack included Zomato, Adani Ports, Kotak Mahindra Bank, Reliance Industries, NTPC, State Bank of India, ICICI Bank, and Bharti Airtel.
Technical Outlook
Anand James, Chief Market Strategist at Geojit Financial Services noted while 23,140 held downsides on expected lines despite the early negativity, upswings failed to find enough momentum to bring down the 23370/90 barrier.
"It remains the level to beat, as has been the case last week too, but favoured view sees the 23550- 640 objectives continuing to be in play. However, for momentum to persist, it would be critical to float above 23330 early in the day. Else, expect slippages to 23268/48, allowing another opportunity for bulls to regroup."
The broader markets also felt the brunt of heavy sell-off with the Nifty Smallcap 100 index falling 2.27 percent, and the Midcap100 declining 2.20 percent.
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