Indian markets slumped on Wednesday amid a selloff in global equities following a flare-up in trade tensions between the US and China. Investors went into a risk-off mode after China slapped tariffs on $50 billion worth of US products in retaliation to fresh duties imposed by US President Donald Trump on Chinese goods.
The Sensex fell 351 points, or 1.05 per cent, to close at 33,019.07, while the Nifty50 index lost 116 points, or 1.14 per cent, to finish the day at 10,128.4. Most Asian peers, too, ended in the red. Most European markets had opened a per cent lower, while the futures market pointed to a weak opening on Wall Street. China has said it would levy a 25 per cent tariff on imports of 106 US products, including soybeans, automobiles and aircraft, in response to proposed American duties on its high-tech goods. The trade dispute spooked investors and raised concerns of global growth slowing.
The India VIX index, a gauge for market volatility, jumped 7.6 per cent to its highest close in six weeks. The selling was broad-based with the small- and mid-cap universe underperforming the large-caps.
“The re-emergence of a trade war has disturbed the momentum. A trade war will definitely be the single-biggest trigger at the moment for global markets. It’s quite crucial that trade tensions be diffused for a sustained bullish recovery. From India’s standpoint, upcoming results and political developments have to be monitored,” said Jagannadham Thunuguntla, head of research (wealth), Centrum Broking.
“The Reserve Bank’s policy is likely to support the near-term sentiment, while a clarity on earnings growth and monsoon will provide more transparency,” said Vinod Nair, head of research, Geojit Financial Services.
Banking shares fell sharply ahead of the RBI’s policy announcement on Thursday. The RBI is expected to maintain a status quo. The Bank Nifty index fell 1.5 per cent, with shares of Axis Bank, Kotak Mahindra Bank and Yes Bank declining over 2 per cent each. HDFC Bank and HDFC fell 1.6 per cent and 1.5 per cent, respectively, causing maximum loss to the Sensex.
On Wednesday, foreign investors were net buyers to the tune of Rs 3.35 billion, while their domestic counterparts pulled out Rs 1.5 billion from the domestic market.
With inputs from agencies