Markets Wobble as Trump’s Tariffs Shake Global Sentiment—RBI’s Policy Decision Now in Focus

Global Trade Tensions Send Shockwaves Through Markets

Indian markets opened lower on February 3, mirroring weakness in Asian and U.S. markets following Donald Trump’s sweeping new tariffs on key trade partners. The move has reignited fears of a global trade war, sending stock markets worldwide into turmoil.

The Sensex and Nifty initially recovered but ended the day in negative territory. By 3 PM, the Sensex was down 360 points (0.5%) at 77,145, while the Nifty fell 137 points (0.6%) to 23,344. Both indices are now trading nearly 10% below their record highs from September 2024, weighed down by lackluster earnings, economic slowdown, and foreign investor outflows.

• Market Breadth: 956 stocks advanced, 2,637 declined, and 130 remained unchanged.

• Global Impact: The S&P 500, Nasdaq 100, and Dow futures all fell 1-1.6%, while Japan’s Nikkei 225 slumped nearly 3% and South Korea’s Kospi tumbled 2.5%.

• Cryptocurrency Selloff: Bitcoin (BTC) lost 4%, while Ethereum (ETH) plunged nearly 16% amid the broader market turmoil.

Sectoral Breakdown: 11 of 13 Sectors Under Pressure

Only two sectors—IT and Auto—managed to stay in the green, while the rest faced heavy selling pressure:

📉 Nifty Oil & Gas (-2.5%)

Jefferies downgraded India's oil refining giants, slashing price targets due to concerns over under-recoveries (losses incurred when selling fuel below cost). As a result:

• Hindustan Petroleum (HPCL) fell 6%

• Bharat Petroleum (BPCL) dropped 4%

• Indian Oil Corporation (IOC) declined nearly 4%

📉 Nifty Metal (-2.2%)

A rising U.S. dollar index and falling base metal prices on the London Metal Exchange (LME) weighed heavily on the metal sector:

• NALCO, Vedanta, and Jindal Stainless plunged 4-6% each

📉 Nifty Energy (-3%)

Oil and gas stocks faced double pressure from global trade uncertainty and budget-related concerns, causing a broad sell-off.

Expert Views: Is the Market Overreacting?

Ashish Bahety, Director at NAV Investment, believes the market’s response has been overstated, suggesting that traders are using every rebound as a selling opportunity.

"The reaction to tariffs is difficult to quantify, as the global supply chain shifts won’t happen overnight. While some industries—like chemicals—may benefit, India won’t replace China in manufacturing due to land and labor constraints," he added.

Trump’s Tariffs: The Fallout

On February 1, Donald Trump announced:

• 25% tariff on Canadian and Mexican goods

• 10% tariff on Chinese imports

China has vowed to challenge the move at the WTO, while Canada and Mexico are preparing retaliatory tariffs. The uncertainty surrounding these developments has triggered a flight to safety among investors, with global stock markets tumbling.

Stock-Specific Action: Winners & Losers

Biggest Losers (Down 3-5%)

• L&T

• ONGC

• Hero MotoCorp

• Coal India

• Bharat Electronics

Biggest Gainers (Up 2-5%)

• Bajaj Finance

• Mahindra & Mahindra (M&M)

• Wipro

• Eicher Motors

• Shriram Finance

Notable Moves

📉 GR Infra Projects (-5%) fell after a disappointing quarterly earnings report.
📈 UPL (+4%) surged as Investec upgraded it from 'Sell' to 'Buy', citing debt reduction potential in FY25.

What’s Next? RBI Policy Decision Holds the Key

With Budget 2025 out of the way, market participants are eagerly awaiting the RBI’s monetary policy announcement on February 7.

📌 Key levels to watch:

• Derivatives data suggests Nifty’s support lies at 23,000, while major resistance is at 24,000.

• If Nifty holds above 23,000, short-term stability is expected despite negative global cues.

📌 Investor Sentiment Drivers:

• Foreign Institutional Investors (FIIs) continue to sell off Indian stocks, a trend that needs to reverse for sustained gains.

• Corporate earnings growth remains tepid, adding pressure to valuations.

• Global risk factors, including U.S. trade policies, will play a crucial role in dictating future market moves.

Bottom Line: While markets remain volatile due to global uncertainties, investors are now looking to the RBI’s upcoming policy decision for direction. Until then, expect continued choppiness with a mix of buying opportunities and caution.