Sensex, Nifty nosedive as Trump’s tariffs spark global trade war fears

Indian equity benchmarks made gap-down opening and are trading under pressure on Monday tracking weak cues from global markets as White House officials showed no sign of backing away from their sweeping tariff plans. Additionally, continued selling by Foreign Institutional Investors (FIIs) dampened markets sentiments. Some pessimism came as CareEdge Ratings in a report said the imposition of high reciprocal tariffs by the US on other competing nations raises the possibility of increased dumping by those nations in India, as well as in other export markets, which could negatively impact certain sectors. Investors avoided to take any position ahead of the Reserve Bank of India’s upcoming monetary policy decision.

On the global front, Asian markets are trading deeply in red, following the broadly negative cues from Wall Street on Friday, amid ongoing concerns about a global trade war after China announced retaliatory tariffs on U.S. goods in reaction to U.S. President Donald Trump's new levies that could fuel inflation and damage the global economy. China announced a 34 percent tariff will be imposed on all imported goods from the U.S. as of April 10, while Canada and the European Union are also preparing countermeasures. Indonesia remains closed for Eid-ul-Fitr holidays.

Back home, on the sectoral front, upstream oil companies’ stocks are trading under pressure as the price of crude oil extended losses after plummeting to its lowest levels in over three years on demand concerns. In stock specific development, Tata Motors plunged as JLR haled its exports to the U.S. for one month due to a 25 percent import tariff imposed by the Trump administration.

The BSE Sensex is currently trading at 72593.61, down by 2771.08 points or 3.68% after trading in a range of 71425.01 and 73149.12. All the 30 stocks are declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 4.55%, while Small cap index was down by 6.08%.

The top losing sectoral indices on the BSE were Metal down by 7.20%, Industrials down by 5.76%, Basic Materials down by 5.61%, IT down by 5.59% and Realty down by 5.40%, while there are no gainers on the BSE sectoral front.

The top losers on the Sensex were Tata Motors down by 9.99%, Tata Steel down by 9.75%, HCL Technologies down by 6.32%, Tech Mahindra down by 6.08% and Larsen & Toubro down by 5.50%.

Meanwhile, CareEdge Ratings in its report 'Sectoral Impact of US Reciprocal Tariff: Neutral to Negative’ has said that the imposition of high reciprocal tariffs by the US on other competing nations raises the possibility of increased dumping by those nations in India, as well as in other export markets, which could negatively impact certain sectors. The report said the expected direct impact of US reciprocal tariffs would vary, with no impact expected on pharmaceuticals since they are exempt from reciprocal tariffs for now.

According to the rating agency, the impact is expected to be largely neutral for electronics, textiles, agricultural products, chemicals, and automobiles and parts. At the same time, it would be negative for gems and jewellery. During 2023-24, India's aggregate merchandise exports to the US stood at $77.5 billion compared to its imports from the US at $42.2 billion. Out of India's total exports to the US, the sectors in descending order of value are electronics, textiles, pharmaceuticals, gems and jewellery, agricultural products, chemicals and automobiles and parts.

Until now, the US has been charging an average tariff of 3.50 per cent on imports of goods from India with respect to the above-said sectors, which is now being increased uniformly to 26 per cent in the form of a reciprocal tariff. Reciprocal tariff imposed by the US on other nations who are India's major competitors in most of the above sectors is higher than us - Vietnam at 46 per cent, Bangladesh at 37 per cent, China at 34 per cent, Taiwan at 32 per cent, Indonesia at 32 per cent and Pakistan at 29 per cent, which augurs well for key export sectors of India.

Since assuming office for his second term, President Trump has reiterated his stance on tariff reciprocity, emphasising that the United States will match tariffs imposed by other countries, including India, to ensure fair trade. On April 2, the US President issued an executive order on reciprocal tariffs, imposing additional ad valorem duties ranging from 10 per cent to 50 per cent on imports from all trading partners. The baseline duty of 10 per cent will be effective from April 05, 2025, and the remaining country-specific additional ad valorem duty will be effective from April 09, 2025. The additional duty on India is 26 per cent.

The CNX Nifty is currently trading at 22021.70, down by 882.75 points or 3.85% after trading in a range of 21743.65 and 22190.00. All the 50 stocks are declining on the index.

The top losers on Nifty were Trent down by 16.28%, Tata Motors down by 9.92%, Tata Steel down by 9.79%, ONGC down by 6.88% and Hindalco down by 6.43%.

Asian markets are trading lower; Hang Seng declined 2443.85 points or 11.98% to 20,405.96, Nikkei 225 slipped 2242.31 points or 7.11% to 31,538.27, Taiwan Weighted lost 2066.52 points or 10.75% to 19,231.70, Straits Times fell 310.65 points or 8.84% to 3,515.21, Shanghai Composite weakened 211.84 points or 6.77% to 3,130.17 and KOSPI was down by 121.38 points or 5.18% to 2,344.04.