Sensex, Nifty: Why stock market is down today? IndusInd Bank, Zomato, Tata Steel tank up to 10%

India benchmarks Sensex and Nifty tumbled 1 per cent each in Tuesday's trade, dancing to the tune of Wall Street that saw key indices sinking up to 4 per cent overnight, as recession prospects in the US economy looked all but real. 

IndusInd Bank tumbled 10 per cent and was the worst Sensex performer as a negative post-tax impact of 2.35 per cent of net worth arising from a markdown on internal derivative trades hit sentiment. IT stocks TCS and Infosys also weighed on the 30-pack index. 

The BSE Sensex fell 300.08 points or 0.40 per cent to 73,815.09. Nifty stood at 22,364.90, down 95.40 points or 0.42 per cent. 

"President Trump’s flip-flop tariff policy and the high uncertainty that it has triggered has started impacting US stock markets. S&P 500 & Nasdaq declining up to 4 per cent yesterday is the market’s response to Trump’s tariffs and the possibility of US recession by the year end. We will have to wait and watch how the situation develops," said V K Vijayakumar of Geojit Financial Services.

On the positive side, the dollar index is down from 109.3 when Trump assumed presidency to 103.71 now. If this trend continues it will be good for emerging markets like India. Capital outflows from India will decline, Vijayakumar said.

"The ideal investment strategy now is not to panic in the market correction and continue with the policy of slow accumulation of high quality stocks mainly in large caps and very selectively in beaten down mid and smallcaps," he said. 

Emkay Global noted that India’s valuations had drifted into an uncomfortable zone two quarters ago and were ripe for a correction that got triggered by the earnings downgrade. Though India valuations have now turned palatable, investor hesitation will dissipate only when earnings downgrades cease, it said.

The imminent risk is from the US economy, as the US President Donald Trump refrained to predict whether the US could face a recession amid his tariff war. "US stock market valuations have reached extreme levels. The Nasdaq-100 is trading at a P/E ratio of 34, i.e. an earning yield of 2.9 per cent, an indication that investors are treating it as a safer bet than US government bonds—a fundamentally illogical market trend. Furthermore, nearly 45% of companies in the Russell 2000 index remain unprofitable, exposing the fragility of the broader US equity market," said Ashika Global Family Office Services. 

At the same time, foreign ownership of US Treasuries has dropped to a two-decade low, reflecting global investor skepticism about the stability of the US economy, the brokerage added.

Nuvama said the market correction in India so far is due to weak domestic earnings and high valuations. But with valuation premium over emerging markets back to 10-year average, India-specific de-rating is perhaps done.

The RBI’s easing could provide near-term relief, it said while suggesting that rising global uncertainties (US growth slowdown and MAGA mania) pose fresh downside risks.

"Historically, during growth uncertainties, equities pivot only when rate cuts are deep, and valuations are cheap. Thus, earnings yields minus bond yields is a good guide for inflection points. This is still far from turning green. Maintain defensive bias," it said.