Stock market selloff: Sensex, Nifty stare at gap-down opening today on Trump tariffs; analyst views

The domestic stock market indices Sensex and Nifty are bracing for a day of sharp fall after the US President Donald Trump said 25 per cent tariffs on Mexican and Canadian imports will start Tuesday, with no room for delay. In a retaliation, Canada also announced 25 per cent tariff on $107 billion worth US goods, thus kicking off the tariff war. This sent Asian markets from Japan to Hong Kong 2 per cent lower. US indices such as Dow Jones Industrial Average and S&P500 shut shop 1.5-1.8 per cent lower overnight on tit-for-tat tariffs and its likely impact on US inflation and economy.     

Canada said its tariffs would remain in place until the US trade action is withdrawn, and should US tariffs not cease, non-tariff measures are likely. 

"Additionally, the US government’s decision to proceed with new tariffs on China from March 4 has sparked concerns about its potential impact on inflation, adding to volatility across global markets. Investors remain cautious as they assess the long-term implications of these trade restrictions," said Ashutosh Mishra, Head - Institutional Equity Research at Ashika Stock Broking. 

Data showed Gift Nifty on the NSE IX was trading 155 points, or 0.70 per cent, lower at 22,102, hinting at a negative start for Sensex and Nifty today.

Nomura said the 10 per cent tariff on China brings cumulative tariffs on China to 20 per cent within less than one and a half months of the start of Trump’s new presidency, lifting average US tariff rates on China to approximately 33 per cent, based on its estimates. 

"We believe Trump’s seemingly soft stance on China over recent weeks was only tactical, with markets potentially underestimating his resolve to curb China and his intent on pursuing bolder measures in his second term. While markets presently overlook these risks, they may take centre stage in the coming months," it warned.

InCred Equities noted that the dollar's role as a reserve currency has been questioned due to rising US debt  levels, the use of sanctions as a financial weapon, and geopolitical fragmentation.  "If the US pursues policies that reinforce economic stability and reduce erratic  decision-making, investors could regain confidence in the dollar. Higher US yields and improved economic outlook could support demand for dollar assets," it said.

MOFSL said the recent market correction has coincided with a slowdown in earnings growth, as the Nifty has managed only 4 per cent PAT growth in 9MFY25, following a healthy 20 per cent-plus CAGR during FY20-24.

"The expectations for FY26 corporate earnings (19% for the MOFSL Universe and 15% for the Nifty-50) are still somewhat elevated, in our opinion, given the underlying macro-micro backdrop and are thus ripe for further downgrades. The recent correction in broader markets factors in some of the potential disappointments in earnings ahead. That said, the valuations for midcaps and smallcaps are still expensive vis-à-vis their history as well as vs. Nifty-50," it said.

The Nifty is trading at a 12-month forward P/E of 18.6 times, below its long-period average (LPA) of 20.5 times. MOFSL is biased toward largecaps with a 76 per cent allocation in its model portfolio. It is OW overweight on consumption, BFSI, IT, industrials, healthcare, and real estate. It is underweight on oil & gas, cement and automobiles.