Indian benchmark indices Sensex and Nifty fell sharply on Monday due to a broad sell-off in global markets on fears of a global trade war and a possible recession in the US. The Sensex closed 2,227 points or 2.95% lower at 73,137, while the Nifty 50 closed 742 points or 3.24% lower at 22,161.
The sell-off was broad-based, with all sectoral indices closing in the red. Metals, realty, auto, financials and IT stocks declined. The total market capitalisation of BSE-listed companies fell by Rs 14 lakh crore to Rs 389 lakh crore.
Reasons for the fall in stock market today:
Nasdaq enters bearish phase
The Nasdaq index officially entered a bearish phase on Friday, falling more than 20% from its recent peak. The decline came after US President Donald Trump announced sweeping tariffs earlier in the week, raising fears of a global economic slowdown. The scale and scope of the tariffs surprised investors, triggering a massive sell-off in global markets.
Federal Reserve Chair Jerome Powell said the tariffs were “higher than expected” and warned that they could significantly impact both inflation and economic growth, raising uncertainty about the US economic outlook.
Global sell-off
Indian equities mirrored the sharp decline in global markets, with key Asian indices falling across the board. Japan’s Nikkei dropped 7.7%, South Korea’s Kospi dropped 5.6% and China’s Shanghai Composite dropped 7.3%. Hong Kong’s Hang Seng index fell more than 13%. US futures also continued to slide, with Nasdaq futures down 3.5% and S&P 500 futures down 3.1%. In Europe, the pan-European STOXX 600 fell 5.8%, marking a fourth consecutive session of declines and the biggest one-day drop since the COVID-19 pandemic began.
Recession fears overshadow inflation concerns
Market participants believe recession concerns outweigh short-term inflation risks. While US consumer price index (CPI) data due later this week is expected to show a 0.3% rise for March, analysts fear tariffs will soon significantly increase costs across all sectors, from groceries to automobiles.
These rising input costs are also expected to squeeze corporate profit margins, just as earnings season begins. About 87% of US companies are scheduled to declare results between April 11 and May 9, with major banks among the first to announce earnings.
Sharp fall in global commodity prices
Global commodity prices fell amid weakening demand and growing fears of an imminent economic slowdown.
Brent crude fell 6.5%, WTI dropped 7.4%, while gold fell 2.4% and silver 7.3%. Base metals also witnessed sharp decline, with copper falling 6.5%, zinc 2% and aluminium 3.2%, as rising trade tensions and recession concerns shook investor confidence.
Investors flee to safe havens
Investors fled to safe assets amid rising fears of a global recession, further pressuring equity markets. The 10-year US yield fell as demand for government bonds increased. The yield on Treasuries fell 8 basis points to 3.916%. Fed funds futures also jumped, raising expectations of an additional 25-basis point rate cut by the US Federal Reserve this year.
This flight to safety fueled a broad-based sell-off in equities, deepening risk-off sentiment in global markets. Fed Chairman Jerome Powell said on Friday that the central bank is “in no rush” to adjust policy, even though market expectations now indicate a 56% chance of interest rate cuts by early May.
Global trade war escalation
Fears of a global trade war have risen after China announced retaliatory tariffs on several US goods, following a broad hike in tariffs by the US earlier in the week. The escalation in countermeasures has raised concerns about a slowdown in global trade and economic growth.
Investors are concerned that prolonged trade tensions between the world’s two largest economies could disrupt supply chains, depress corporate earnings, and further weaken already weak global demand – leading to a sharp sell-off in equities across the world.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “Global markets are witnessing extreme volatility due to extreme uncertainty. No one has a clear idea of how this turmoil created by Trump’s tariffs will unfold. A ‘wait and watch’ approach may be the best strategy during this period of market volatility.”