Crash course: Benchmark indices tumble 2% after fresh US tariff shocker

Nifty 50 endures longest weekly losing run in 30 yrs

Benchmark equity indices plunged nearly 2 per cent on Friday, marking their steepest single-day drop in more than four months. The selloff was driven by deteriorating investor sentiment following US President Donald Trump’s latest trade tariff announcements, weak corporate earnings, and sustained foreign portfolio investor (FPI) outflows.

 

Equity markets across Asia and Europe suffered sharp declines as investors weighed the broader impact of the trade tariffs on the global economy.  

The Sensex ended the session at 73,198, down 1,414 points, or 1.9 per cent, while the Nifty 50 closed at 22,125, losing 420 points, or 1.9 per cent. 

 

These declines represent the sharpest single-day fall for both indices since October 4. For the Nifty 50, it also marked a fifth consecutive monthly decline — the longest losing streak since 1996.

  Following the latest drop, the 30-share index has fallen 14.7 per cent from its all-time high, while the broader Nifty 50 is down 15.6 per cent. The Nifty Midcap 100 has joined the Nifty Smallcap 100 index in “bear market territory”, with both indices now down 21.3 per cent and 25.2 per cent, respectively, from their peaks.

  Over the past five months, the market downturn has wiped over ₹90 trillion off the total market capitalisation of BSE-listed firms, reducing it to ₹384 trillion.

  The Nifty 50 has been among the worst-performing major equity benchmarks globally in this period, shedding 14.3 per cent. However, benchmark indices in Indonesia, Thailand, and the Philippines have experienced even steeper declines. 

On Friday, FPIs offloaded shares worth ₹11,639 crore — their largest single-day sale since November 28, 2024 — while domestic investors stepped in as net buyers to the tune of ₹12,309 crore. 

  On Thursday, Trump announced that 25 per cent tariffs on Canada and Mexico would take effect from March 4, along with an additional 10 per cent levy on Chinese imports. The move has heightened tensions between the US and its largest trading partners. Although the US President had paused the tariffs on Canada and Mexico on February 3 for a month, these measures are expected to dampen US economic growth, drive up inflation, and potentially push Mexico and Canada into recession. China, in response, has vowed to take “necessary measures” to defend its economic interests.

 

Chinese goods imported into the US already face at least 10 tax after a Trump tariff order that went into effect earlier in February.

 

“The frequent tariff salvos are the biggest uncertainty. A 10 per cent duty on Chinese imports might be manageable, but 20 per cent would be far more challenging. India could gain a competitive pricing advantage, but investors remain cautious, fearing that India could be the next target for tariffs. They are waiting for the trade skirmishes to subside before making major investment decisions," said U R Bhat, co-founder of Alphaniti Fintech.

 

The Indian equity markets have been under pressure since October 2024, weighed down by slowing corporate earnings growth, stretched valuations, and sustained FPI selling. Since then, FPIs have been net sellers to the tune of ₹2 trillion, as investors have sought the relative safety of US assets over emerging markets such as India. 

 

“Capital is flowing back to the US, partly due to a stronger dollar and Trump’s policies. Even if India remains an attractive investment destination, FPIs currently lack the funds to deploy here, as money is being redirected to the US,” said Pratik Gupta, CEO and co-head of institutional equity at Kotak Securities.

 

Market experts expect continued turbulence until US trade policy stabilises. The breadth of the market remained weak, with 3,343 stocks declining and just 660 advancing on the BSE. All but one Sensex stock ended in the red, with Infosys contributing the most to the decline, dropping 4.3 per cent.