Sensex and Nifty fell for the second session in a row on February 3, after having opened nearly 1 percent lower, mirroring weakness in Asian markets, as US President Donald Trump's sweeping tariffs on Canada, Mexico, and China reignited fears of a global trade war. The broader markets outperformed the benchmarks, with the BSE Midcap up 1 percent and the BSE Smallcap rising 1.8 percent. With Budget 2025 now behind, all eyes are on the RBI's monetary policy announcement on February 7.
At close, the Sensex was down 319 points or 0.4 percent at 77,186, and the Nifty was down 121 points or 0.5 percent at 23,361. About 1,102 shares advanced, 2,742 shares declined, and 163 shares were unchanged. Both indexes are now trading nearly 10 percent below their record highs from September 27, weighed down by a tepid earnings season, economic slowdown, and persistent foreign selling.
"The market's reaction to recent events has been somewhat exaggerated," Ashish Bahety, Director of NAV Investment told Moneycontrol. "Their strategy is clear: every pullback or uptick is an opportunity to cash out, which is evident in the performance of large-cap stocks today."
"When it comes to the impact of tariffs, it's challenging to predict the long-term effects. The ongoing trade imbalance, fueled by tariffs, is creating uncertainty, and it's hard to gauge how it will evolve," Bahety said.
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As for India's potential to benefit from the trade shifts, Bahety said that it's unlikely for India to fill the gap left by China. "India faces numerous internal challenges such as land reforms and labor issues, and we're far from producing goods at the low costs China manages. While some sectors, like chemicals, may see opportunities, India won't be able to fully replace China or developed countries in the global supply chain," he added.
On February 1, U.S. president Donald Trump slapped a 25 percent tariff on Canada and Mexico and a 10 percent levy on Chinese goods, citing border security and drug trade concerns—measures he had been threatening for weeks. Canada and Mexico vowed retaliation, while China prepared to challenge the move at the World Trade Organization (WTO).
Markets worldwide have been reeling since the latest tariff shock, with investors scrambling to assess the fallout. U.S. stock futures tumbled at the start of the new trading month, S&P 500 and Nasdaq 100 futures both dropped 1.6 percent, while Dow futures shed over 1 percent.
The turbulence wasn't confined to Wall Street. In Asia, Japan's Nikkei 225 slumped nearly 3 percent, while the Topix slid 2.5 percent. South Korea's Kospi and small-cap Kosdaq plunged 2.5 percent and 3.4 percent, respectively. Meanwhile, Hong Kong's Hang Seng Index slipped 0.3 percent in late trade.
Cryptos weren't spared either. Bitcoin (BTC) fell over 4 percent, while Ethereum (ETH) plummeted almost 16 percent, mirroring the broader risk-off sentiment.
Back home, selling pressure was widespread. Nifty IT and Nifty Auto were the only two sectoral indices to hold ground, up 0.5 percent and 0.1 percent, respectively. The rest of the 11 major indices bled, with Nifty Oil & Gas, Nifty Metal, and Nifty Energy tanking 2-3 percent each.
The Nifty Metal index fell over 2 percent, weighed down by a spike in the dollar index after Trump's sparked fears of an escalating trade war amid major economies. Alongside, prices of base metals also slipped on the London Metal Exchange, further exacerbating pain for metal counters. Shares of NALCO, Vedanta, and Jindal Stainless were the worst hit within the metal pack, falling 4-6 percent each.
The Nifty Oil & Gas index fell 2.5 percent after Jefferies slashed its price targets for India's state-run oil refiners—Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL), and Indian Oil (IOC)—triggering a sharp sell-off. HPCL dropped 6 percent, BPCL slipped 4 percent, and IOC declined nearly 4 percent as investors reacted to the Budget 2025's lack of provisions to offset under-recoveries for oil marketing companies (OMCs).
When it comes to individual stocks, GR Infra Projects shares saw a sharp drop of about 5 percent following a mixed quarterly performance report on the same day as the Union Budget announcement. UPL shares jumped over 4 percent after Investec upgraded the stock to 'buy' from 'sell.' The brokerage also raised its price target to Rs 700 from Rs 450, citing expectations of successful debt reduction in FY25.
L&T, ONGC, Tata Conumer, Coal India, and Bharat Electronics were the biggest losers on Nifty 50, falling 2-5 percent. Meanwhile, Bajaj Finance, M&M, Wipro, Shriram Finance, Bajaj Finserv were the top gainers, rising 2-5 percent.
Despite the chaos, some technical signals offer a glimmer of stability. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, said, "Derivatives data shows the highest call positions at 24,000 and puts at 23,000. As long as the market sustains 23,000, it should remain stable despite negative global cues, including U.S. tariff policies, which impacted sentiment today."
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