Sensex, Nifty stay red as Trump's tariffs shake global market sentiment; mid-, small-caps drop over 1%

In the broader market, both BSE Midcap and BSE Sensex rose over 1 percent each.

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Sensex and Nifty remained under pressure around noon on February 3 after opening 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 market outperformed the benchmarks, with both the BSE Midcap and BSE Smallcap indices rising over 1 percent each. With Budget 2025 now behind, all eyes are on the RBI's monetary policy announcement on February 7.

At 12:25 PM, the Sensex was down 511 points or 0.7 percent at 76,994, and the Nifty was down 196 points or 0.8 percent at 23,286. About 953 shares advanced, 2,529 shares declined, and 144 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.

"Despite an excellent Budget the market will be under pressure from the Trump tariffs and the heightened global uncertainty these 'initial round of tariffs' has triggered," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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Trump imposed a 25 percent tariff on Canada and Mexico and a 10 percent levy on Chinese goods over the weekend, citing the need to curb illegal immigration and the drug trade—measures he had been threatening for weeks. Canada and Mexico have pledged retaliatory measures, while China said it would challenge the 10 percent levy at the World Trade Organization.

"Now we don't know how this will pan out. For now, India is not affected. Therefore, the impact on the Indian market will be less. But the spike in the dollar index to above 109.6 will trigger more selling by FIIs putting the market under pressure," Vijaykumar said.

Asian stock markets tumbled on February 3, with US equity futures pointing sharply lower, following the US tariff announcement.

Markets across Asia fell broadly in response. Japan’s Nikkei 225 dropped nearly 3 percent, marking its sharpest decline since November. South Korea's Kospi index fell 3 percent, while MSCI Taiwan dropped 5.6 percent, impacted by the tech-heavy economy's reliance on global trade. Hong Kong’s Hang Seng index edged down 0.7 percent, after initially dropping as much as 2 percent. Mainland China's stock markets remained closed for the Lunar New Year holiday and will reopen on February 5.

In the US, futures linked to the tech-heavy Nasdaq Composite dropped nearly 3 percent, while S&P 500 futures fell over 2 percent.

Also Read | What Trump tariffs mean for the Indian economy and markets

Driven by escalating fears of a global trade war following Trump's tariff announcement, Bitcoin (BTC) dropped over 5 percent, fluctuating between $91,279 and $100,461. Ethereum (ETH) saw a sharper decline, down almost 18 percent, with an intraday range of $2,147.05 to $3,131.63.

Coming back to India, all sectoral indices except IT were in the red.

The Nifty Metal index fell over 3 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 SAIL, Vedanta, and Jindal Stainless were the worst hit within the metal pack, falling 4-5 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).

Bajaj Finance, Bajaj Finserv, M&M, Eicher Motors, and Bharti Airtel were the top gainers on the Nifty, rising 2-3 percent. On the other hand, Bharat Electronics, L&T, ONGC, NTPC, and Coal India were the biggest losers, falling 3-6 percent.

After a weak opening, Hardik Matalia, Derivatives Analyst at Choice Broking, said Nifty could find support at 23,200, followed by 23,100 and 23,000. "On the higher side, 23,500  can be an immediate resistance, followed by 23,600 and 23,700."

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.