Sensex and Nifty tumbled almost 2 percent on February 28, caught in a wave of broad-based selling as fears of a full-scale global trade war and concerns over a slowing U.S. economy rattled investors. The market lost Rs 8.8 lakh crore in total market capitalization. All 13 major sectoral indices traded deep in the red, while the BSE Smallcap and BSE Midcap indices bore the brunt, sliding over 2 percent each. IT and financial stocks, where foreign investors hold significant stakes, accounted for half of Nifty 50’s losses.
US President Donald Trump announced on February 27 that his proposed 25 percent tariffs on Mexican and Canadian goods would take effect on March 4, alongside an additional 10 percent duty on Chinese imports, citing the continued flow of deadly drugs into the U.S. These new tariffs will stack on top of the 10 percent levy imposed on February 4 over the fentanyl crisis, effectively raising the total duty on Chinese imports to 20 percent.
By close, the Sensex had plunged 1,420 points, or 1.9 percent, to 73,192, while the Nifty shed 418 points, or 1.9 percent, to 22,126. On the NSE, the breadth of the market painted a starkly negative picture, with just 400 stocksadvancing against a staggering 2,221 declining. The benchmarks closed lower for their fifth straight month—the longest losing streak in 29 years. A combination of concerns over slowing economic growth, fading earnings momentum, Trump’s trade policies, and relentless selling by foreign investors has dragged the benchmarks down 18 percent from their record highs in late September.
"While the recent tariff announcements have added uncertainty, Indian markets have also corrected due to their rich valuations, particularly in the mid-cap and small-cap segments," said Kunal Rambhia, Fund Manager & Trading Strategist, The Streets.
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V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected the US president. "The spate of tariff announcements by Trump has been impacting markets and the latest announcement of additional 10% tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favourable to the US."
Despite the prevailing pessimism, Vijayakumar believes that a full-blown US-China trade war is unlikely. He expects a recovery in Indian markets in March, driven by improving macroeconomic data and a slowdown in FII outflows.
So far in February, foreign institutional investors have offloaded Indian equities worth Rs 47,349 crore, while domestic institutional investors have stepped in with net purchases of Rs 52,544 crore.
Rambhia said that at this stage, stock selection is crucial. "I would focus on identifying fundamentally strong companies that are trading at a significant discount—around 40-50 percent lower than their highs. These counters could present attractive buying opportunities over the next six to eight months," Rambhia said. He said that the mid-cap and small-cap space requires careful differentiation between fundamentally strong businesses and weaker ones.
Also Read | Smallcap, midcap indices crash over 3%, Rs 18 lakh crore eroded since correction began
Sectoral carnage was most pronounced in IT stocks, with the index plunging over 4 percent after U.S. jobless claims data fueled fears of an economic slowdown. So far this week, the IT index has shed nearly 8 percent, far exceeding the broader Nifty 50's decline of over 2 percent.
Banking stocks struggled as well, with the Nifty Bank index slipping 0.8 percent as 11 of its 12 constituents ending lower.
Nifty Auto, Nifty FMCG, Nifty PSU Bank, Nifty Healthcare, Nifty Oil & Gas, and Nifty Media tumbled 2-4 percent.
Among Nifty 50’s biggest losers, M&M, Bharti Airtel, Wipro, Tech Mahindra, and IndusInd Bank tumbled 5-7 percent. Meanwhile, Hindalco, Trent, HDFC Bank, and Coal India emerged as the session’s top gainers, climbing 0.3-2 percent.
Among individual stocks, Premier Energies slumped almost 6 percent as its six-month shareholding lock-in period expired. Shares of IREDA saw an even steeper decline, dropping more than 7 percent as the stock debuted in the Futures & Options (F&O) segment at the start of the March series. The sharp drop follows a strong run, with gains in four of the last five trading sessions.
Global cues remain weak, with Wall Street closing lower on February 27 after disappointing U.S. economic data and a tech-sector selloff. European markets opened in the red today, rattled by Trump’s renewed tariff threats against the EU. Asia-Pacific markets followed suit, tumbling today after Trump confirmed that tariffs on imports from Mexico and Canada will take effect next week.
"As long as Nifty remains below 22,500, the bearish momentum is likely to persist, with 22,000 acting as immediate support, followed by 21,850 where the 100-Weekly Simple Moving Average (100-WSMA) is placed," said Hrishikesh Yedve, AVP of Technical and Derivatives Research at Asit C. Mehta Investment Intermediates.
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