Sensex, Nifty slump 3% on tariff tremors in sharpest fall since June 2024, but less severe than global rout

Asian markets ended April 7 with significant losses. Taiwan’s benchmark halted trading after a 9.7% crash, Japan’s Nikkei 225 dropped 7.4% into bear market territory, and Hong Kong’s Hang Seng index plunged 13%

Benchmark indices posted their sharpest single-day fall since June 2024, with both Sensex and Nifty 50 closing over 3% lower, however, falling less compared to Asian and European peers, as trade war fears roiled world equities on April 7.

The key indices had started off with a sharp 5% fall in early trade, but recovered partially through the session, underscoring their relative resilience amid heightened global volatility.

In stark contrast, Asian indices ended April 7 with significant losses, with the Taiwanese benchmark halting trade after a 9.7% crash, Japan’s Nikkei 225 falling 7.4% into bear territory, and Hong Kong’s Hang Seng index plunging 13%.

European equities too suffered heavy losses, with Germany’s DAX falling 6.1% at the open, France’s CAC 40 down 6.2%, and UK’s FTSE 100 down 4.8% by afternoon trade. Meanwhile, in the US, Dow Futures slumped 1,200 points (3.3%), while the S&P 500 and Nasdaq Futures dropped as much as 4%.

The global sell-off was triggered by China's counter-measures  to the retaliatory tariffs imposed by US President Trump, sparking widespread panic across Wall Street, Asia, and Europe.

Market experts fear the tariff spat could escalate into a full-blown trade war, fuelling recessionary concerns and dampening global consumption. Goldman Sachs economists have increased their estimate of a US recession and advanced their projection for the next Federal Reserve rate cut.

In a note dated April 6, Goldman economists, led by Jan Hatzius, downgraded their 2025 Q4-to-Q4 GDP growth forecast from 1% to 0.5%, while raising the 12-month recession probability from 35% to 45%. They cited 'tightening financial conditions, rising policy uncertainty, and reduced capital expenditure' as key risk factors.

According to Bloomberg, JPMorgan Chief Economist Bruce Kasman has raised the probability of a global recession in 2025 to 60%, up from 40%, noting that the compounded effects of retaliatory tariffs, weakening US business sentiment, and supply chain disruptions in a report titled There Will Be Blood.

Analysts at JM Financial said that the impact on Indian exports is likely to be muted, due to the country's diversified trade portfolio and lower exposure to tariffs compared to other Asian economies. However, uncertainty remains around the eventual burden of tariffs, implications for goods in transit, commodity price volatility, and potential retaliatory actions.