Sensex, Nifty crash: Rs 7 lakh crore gone on Trump's tariff threat, what's next?

Benchmark indices crashed on Tuesday amid high volatility on Dalal Street. Sensex closed 1,235 points lower at 75,838 and Nifty slipped 320 pts to 23,024. With today's crash, Sensex is down 2.94% and Nifty has lost 2.62% this year. US President Donald Trump said that he expects to put 25% tariffs on Canada and Mexico starting on February 1, dampening investor sentiment. 

Following the US elections, he announced a plan to implement 25 per cent tariffs on Canada and Mexico. Donald Trump’s swearing-in as the new US President raises risk to global economic growth rate due to tariff hikes, said InCred Equities.

The tepid ongoing earnings season also brought back bears on the Dalal Street today. 

Investor wealth tumbled by Rs 7.35 lakh crore to Rs 424.24 lakh crore compared with a valuation of Rs 431.59 lakh crore recorded in the previous session on January 20. 

Zomato, Adani Ports, SBI, NTPC, Reliance Industries, NTPC and ICICI Bank led the losers on Sensex, falling up to 11%. 
UltraTech Cement and HCL Tech were the only gainers on Sensex, rising up to 0.76%. 

Vinod Nair, Head of Research, Geojit Financial Services said, "Domestic markets experienced a significant decline today, with heightened volatility, followed by Trump's announcement of trade tariffs on neighbouring countries on his inauguration day, adding uncertainty into global markets. The weak recovery in the ongoing Q3 earnings, coupled with a depreciating INR, are likely to prompt further outflows from FIIs. Additionally, the expectation of an interest rate hike by BoJ is dampening market sentiment."

Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Markets were on a cautious mode in the past few sessions, but witnessed frenzied selling on Tuesday as investors now fear that Trump's inaugural speech to safeguard America's interest could hurt economic prospects of many countries, including India, going ahead. While foreign investors continue to offload domestic shares at will, any further rise in US bond yields could trigger massive selling."

On the outlook of Nifty, Aditya Gaggar Director of Progressive Shares said," The Index formed a large bearish candle, breaking its range, and indicating a stronger bearish trend. The negative momentum is expected to persist, with support seen at the 22,800 level, coinciding with long-term trendline support. Immediate resistance lies around 23,140."

Meanwhile, as many as 103 stocks hit their 52-week highs today. On the other hand, 67 shares fell to their 52-week lows. However, market breadth was negative. Out of 4088 stocks traded, 1187 stocks closed in the green on BSE. Around 2,788 stocks ended in the red while 113 stocks remained unchanged.

Around 6 stocks hit their lower circuits. On the other hand, 8 shares hit their upper circuit limits, amid negative sentiment in the equity market.

BSE midcap index fell 882 pts to 43,167 and BSE small cap stock index slipped 1024 pts to 51,714 level.

Foreign institutional investors sold Rs 4,336 crore worth of equities on a net basis on Monday, while domestic investors bought Rs 4331 crore of shares, as per provisional NSE data.

Previous session

The Indian equity indices started the week on positive note. Sensex rose 454 points at 77,073 and Nifty gained 141 points at 23,344 on Monday.