Indian benchmark indices Sensex and Nifty50 tanked in trade on Monday, February 3, 2025. The BSE Sensex slumped 750 points or 0.96 per cent and logged an intraday low at 76,756.09. Likewise, the National Stock Exchange (NSE) Nifty tanked 260 points or 1.1 per cent to the day's low at 23222.
Around 10 AM, on BSE, Power Grid, NTPC, Tata Steel, Tata Motors, and Larsen and Toubro (L&T) were among the top laggards. Meanwhile, on NSE, Bharat Electronics (BEL), Bharat Petroleum Corporation (BPCL), Coal India, ONGC, and NTPC were the top five losers.
Here are a key reasons why the market plunged on Monday, February 3, 2025:
Trump levied tariffs on Mexico, Canada and China
US President Donald Trump slapped Canada and Mexico with duties of 25 per cent and China with a 10 per cent on Saturday, calling the measures necessary to combat illegal immigration and the drug trade, as per reports. The punitive tariffs are almost universally seen as damaging to economic growth and financial assets.
"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. It is important to understand that the 25 per cent tariffs imposed on Mexico and Canada are to punish them for issues like immigration and illicit trade in fentanyl. Trump may use tariffs again against other countries on non-trade issues. China’s response to the 10 per cent tariffs has been more responsible," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
For now, they have not reacted like Mexico and Canada by imposing tariffs on imports from the US. Instead, they are moving the World Trade Organisation against the US action, Dr. V K Vijayakumar added.
Also Read
Weakness in global markets
In Asia, Japan's Nikkei was down 2.56 per cent and Australia's ASX 200 was down 1.83 per cent. Chinese markets were closed due to the Chinese New Year.
The markets fell after Trump levied tariffs. Apart from that, weakness in Japan's factory activity dragged down the Japanese stocks. Japan's final au Jibun Bank Japan manufacturing PMI also slumped to 48.7 in January, lower than the 48.8 in the flash reading and 49.6 in December.
Lower-than-expected capex allocation in Budget 2025
For FY26, Finance Minister Nirmala Sitharaman, in her Budget for 2025-26, raised the capex target to Rs 11.2 trillion, which is lower than expected.
The government had set a Budget Estimate (BE) for capex at Rs 11.11 trillion for FY25, against which it is expected to miss the target by Rs 93,000 crore.
“Budget 2025 seems to have addressed the issue of consumption slowdown by providing a boost to the middle class in the form of lower tax. However, capex may not be as budgeted and could be a worry for growth. Further, New tax code needs to be seen for any changes in capital gain tax,” said Vikram Kasat, head of advisory at PL Capital.
On Monday, capital goods stocks were hit due to lower-than-expected capex in Budget 2025, BSE Capital Goods index slipped 4.45 per cent. On the index, among others, Bharat Dynamics, and Power India were down over 8 per cent, Siemens, Thermax, ABB India, HAL, Titagarh, Inox Winds, and Rail Vikas Nigam (RVNL) slipped over 6 per cent.
FII selling
Post-budget foreign institutional investors (FIIs) sold Rs 1,327.09 crore worth of equities in the Indian markets.
"FIIs would wait for local currency to stabilise before committing any significant investments. Therefore, their selling may continue till the Budget is presented or even till March 2025," said Chokkalingam G, Founder, Equinomics Research Pvt Ltd.
Broader markets and sectoral indices bleed
Broader market indices, BSE Midcap and Smallcap, experienced a sharp sell-off and fell over 1 per cent.
Among others, on BSE Midcap, Hindustan Petroleum, RVNL fell over 6 per cent, NMDC, SAIL declined over 5 per cent, Mazagon Dock, IREDA, and Cummins India fell over 4 per cent.
On BSE Smallcap, among others, Bharat Dynamics fell over 8 per cent, Jupiter Wagons, JP Power over 7 per cent, Garden Reach Shipbuilders, Power Mech, and HUDCO over 6 per cent.
On the sectoral front, except Nifty Pharma, all indices traded in red. Among others, a sharp sell-off was seen in metal stocks. Nifty Metal was down over 3 per cent.