Stock market: Sensex, Nifty brace for selloff after Wall Street meltdown; levels to watch

Stock market today: Benchmark stock indices Sensex and Nifty braced for a gap-down opening on Tuesday, tracking overnight meltdown in US stocks, as fears of a possible recession in the US economy got ignited amid tariff war. S&P 500 and Nasdaq registered their biggest drops since 2022 with up to 4 per cent falls, while the Dow Jones cracked 2.08 per cent, as the US President Donald Trump declined to predict whether the US could face a recession. Gift Nifty futures fell as much as 160 points earlier today, hinting at weak start for the domestic stock market. 

There were earlier expectations that while the trade uncertainty would weigh on business spending, it would unlikely to lead to a recession. Dow Jones plunged 2.08 per cent to 41,911.71. S&P500 crashed 2.70 per cent to 5,614.56. Nasdaq Composite sank 4 per cent to 17,468.32.

Global uncertainties have only rise due to moderating US growth and MAGA mania’s tariffs and potential DOGE measures. This raises US recession risks, potentially weighing on EM flows and dampening risk sentiment.

Nomura noted that trade restrictions are already beginning to weigh on business sentiment and should begin to put upward pressure on US inflation going into the spring. Job gains picked up to 1,51,00 in February, while the unemployment rate ticked up to 4.1 per cent. Near-term risks from the federal hiring freeze and DOGE-related layoffs persist, it 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.

"Equity turnarounds are premised on earnings revival or policy easing (QE). Earnings outlook is weak given fading margin tailwinds, weak demand and global uncertainties. On rates, global bond yields are still elevated despite rate cuts implying limited easing so far. Historically, earnings yields minus bond yields (average of US and India 10Y) is a good guide for inflection points during downturns. On this metric, equities are still 1SD expensive, implying a distant durable bottom," Nuvama said.

Sensex, Nifty levels to watch

Shrikant Chouhan of Kotak Securities said 22,500 level on Nifty  and 74,300 level on Sensex would be the key level to watch by day traders. As long as the market is trading below this level, the weak sentiment is likely to continue, he said.

"On the downside, it could retest the levels of 22,350-22,300/74000-73,700. Conversely, if it moves above 22,500/74,300, the sentiment could change, and the market could rally to 22,650-22,700/74,500-74,700," he added.