Benchmark indices Sensex and Nifty faced heavy selling pressure on Monday, tracking weak global cues and uncertainty surrounding U.S. trade policy. Continuous foreign fund outflows added to the negative sentiment, pulling the markets lower.
The BSE Sensex tumbled 906.97 points, or 1.19 percent, to hit an intraday low of 75,283.49. Meanwhile, the NSE Nifty breached the critical 22,800 mark, to the the day's low of 22,786.90, down 305.3 points, or 1.3 percent.
Key laggards in the session included Zomato, HCL Technologies, PowerGrid, Tata Motors, Adani Ports, Reliance Industries, IndusInd Bank, Infosys, Tata Consultancy Services, and HDFC Bank.
Key Factors Behind the Decline
1. Uncertainty Around U.S. Trade Policy: Investor sentiment was weighed down by escalating uncertainty around U.S. trade policies. U.S. President Donald Trump, in a significant move, announced 25 percent tariffs on Colombia, hours after President Gustavo Petro blocked US military deportation flights.
"A major concern is that President Trump is coming up with new threats like the 25 % tariff on Columbia for its refusal to take back deported illegal immigrants. The threatened 25% tariff on Canada and Mexico might be implemented from February 1st onwards. Therefore, will Trump walk his talk on other threats including tariffs on China and other countries, is a question that is being asked in economic and market circles now. These concerns are weighing on the markets," V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said.
2. Federal Reserve Jitters: The two-day Federal Open Market Committee (FOMC) meeting between January 28-29 , the first since Trump’s return to office, is adding to the market's cautious approach. According to Reuters Poll, the Federal Reserve will maintain interest rates in its January 29 meeting, but potential rate cuts in March remain a topic of speculation amid concerns over Trump's economic pledges, including tariffs and extended tax cuts. "This week is likely to be highly volatile, with the Fed decision and India’s Budget announcements looming large," Vijayakumar added.
3. Weak Global Cues: Global markets offered little support to domestic indices. U.S. stock futures declined sharply, with the S&P 500 down 1 percent and Nasdaq 100 futures dropping 1.9 per cent during Asian trading hours. Concerns over DeepSeek's cost-efficient AI model disrupting business models of tech giants like Nvidia, OpenAI, and Google further added to the risk-off sentiment.
Asian markets reacted mixedly, with Hong Kong's Hang Seng Tech Index climbing 2 per cent, while Japan’s Nikkei 225 futures dipped 0.6 per cent. Shares of Nvidia supplier Advantest Corp. plummeted 8.6 per cent in Tokyo, while SoftBank Group lost 5.4 per cent.
Technical View
Market analysts warned of a continued downtrend in the absence of a strong recovery.
"On Friday, about 50 per cent of NSE 500 stocks pulled back at least 2 per cent from the day's high, indicating a sharp reduction in risk appetite," said Anand James, Chief Market Strategist, Geojit Financial Services.
He added, "For the Nifty, a push above 23,211 is required to signal strength. Otherwise, the index may test levels of 22,260 to 22,000 in the coming sessions."
Outlook
With lingering uncertainties around U.S. trade policy and global market weakness, Indian equities may remain under pressure. Investors will closely monitor the Federal Reserve’s stance and India’s Budget announcements later this week for further cues.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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