Trump tariffs: TRUMP & DUMP: Fall season as T-War comes to D-Street

Mumbai: The sell-off in Indian equities deepened with stock benchmarks on Tuesday extending their losing run to the fifth straight day, dragged down by worries about a trade tariff war and reducing risk appetite among domestic investors.

The NSE Nifty tumbled 1.3% or 309.80 points to finish at 23,071.80. The BSE Sensex slumped 1.3% or 1,018.20 points to close at 76,293.60. The slump in the broader market was deeper with the Nifty Midcap 150 index tumbling 2.9% and the Smallcap 250 index 3.4%.

“The steep declines were purely margin calls as the participation levels from retail and HNIs have come down since the markets have been correcting,” said A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC. “The rupee is also anticipated to be under pressure because a stronger dollar is dampening sentiment.”

In the previous five trading sessions, the Sensex and Nifty have dropped 2.6% each, while the mid-cap and small-cap indices have declined almost 6% each. Balasubramanian said that the liquidity has reduced significantly in a falling market that has impacted the broader markets the most.

The nervousness among investors has worsened as Donald Trump is expected to impose reciprocal tariffs on countries that impose duties on US goods. Nomura said India, Thailand and China are at the risk of higher reciprocal tariffs as these countries have higher relative tariff rates on US exports. Trump on Monday announced 25% tariffs on steel and aluminium imports ‘without any exemptions or exceptions’.

At home, all sectoral indices closed lower. Nifty Realty slumped 3.1% while Nifty Auto and Consumer Durables tumbled 2.3% each. Nifty FMCG declined 1.9% while Nifty IT moved 1.5% lower. Bank Nifty fell 1.2% while Nifty PSU Bank and Private Bank indices shed 2.2% and 1.2%, respectively.The Volatility Index or VIX – the market’s fear gauge – rose 2.9% to 14.87 on Tuesday, suggesting traders see higher risks in the near term.Technical analysts said indicators are pointing to continued weakness. “The market breadth in today’s session was bearish implying evident selling pressure,” said Ruchit Jain, vice president technical research at Motilal Oswal Financial Services.

“Nifty is not expected to breach the immediate support of 22,800-22,500 levels but no major rebound is also likely at current levels amid weak sentiment.” Jain said that the broader market is expected to continue to underperform the benchmark in the near term. Foreign portfolio investors net sold shares worth Rs 4,486.41 crore on Tuesday. Their domestic counterparts bought shares worth Rs 4,001.89 crore.

“Further volatility is expected especially given the foreign selloff and the weak currency, but the manner in which the markets are correcting indicates that any further falls will make it attractive from a valuation perspective,” said Balasubramanian.

Of the 4,097 shares traded on the BSE, 479 advanced, while 3,533 declined. In the past one month, the mid-cap and small-cap indices plunged over 7% and 10%, respectively, while benchmark indices fell around 1.5% each.