Domestic equities reeled under selling pressure on Monday, mirroring the rout seen across global financial markets as fears of a full-blown global trade war thrashed investor sentiment.
The market rout comes in the midst of a tariff war after the US announced reciprocal tariffs on several trade partners including India and China. In response, China also announced retaliatory tariffs on the US, sparking volatility and fanning fears of a worsening global trade setup.
After spending the day in a sea of red, the Sensex ended the session 2,226.79 points or 2.95% lower to settle at 73,137.90, extending its losses on the third straight session. Taking a slightly sharper blow, the Nifty 50 lost 742.85 points or 3.24% to end the session at 22,161.60. The selloff also wiped out Rs 20 lakh crore in market capitalisation today.
At it day's low, the 30-stock index had plunged around 4,000 points while the Nifty 50 broke below 21,800.
From a sectoral perspective, all indices closed in the negative territory. The metal, realty, media, and auto sectors bore the brunt of the aggressive selling, logging in the steepest fall.
At the heart of the panic that seen across global financial markets was the worsening trade tensions across major world economies. Scarring investors further was US President Donald Trump's hardlined stance as he vowed to stand put on his tariff plans. Brushing off the market pain as temporary, Trump touted his tariff moves as a medicine, needed to "fix something."
Further, the President's strong stance on holding on to his tariff plan also intensified worries over an imminent recession in the world's largest economy as it bears the brunt of more expensive imports.
Lingering uncertainty over the future of Trump's big tariff plans also continued to send shockwaves across investors. The fear was reflected in the India VIX, a barometer to test volatility in the market, as it shot up a staggering 57%. The sharp spike in the India VIX reveal that investors are bracing themselves for higher uncertainty and risks over the short-term as the global trade setup gets caught in a turmoil.
"Investor confidence was severely shaken by several factors that include growing global recession fears, heightened concerns about potential US tariff actions on Indian goods, and substantial selling pressure in frontline stocks ahead of the upcoming earnings season," Devarsh Vakil, Head of Prime Research, HDFC Securities.
The widespread panic ran much deeper across global markets though. Overnight on Wall Street, the S&P 500, tech-heavy Nasdaq Composite and Dow Jones Industrial Average tanked nearly 6% each.
Equities across Asia took a deeper plunge, as Hong Kong’s Hang Seng plummetd 11%, Tokyo’s Nikkei 225 lost 7%, Shanghai Composite lost over 6% and South Korea’s Kospi fell 5%. Japanese stock futures had to be even halted briefly in early trade after hitting lower circuit limits.
