The Sensex and Nifty fell sharply in Tuesday's trade as the tit-for-tat tariff war began, with Asian markets concerned about the impact on exports, global inflation, and economic growth.
Most Asian markets fell up to 2% today, mirroring the selloff on Wall Street overnight, as tariff threats turn into action, dragging domestic benchmarks lower at the start. Sensex fell 371 points, or 0.51 percent, to 72,713. The Nifty fell by 149.90 points, or 0.68 percent, to 21,969.40. The India VIX, which indicates market volatility over the next 30 days, rose 1.32 percent to 13.95.
According to V K Vijayakumar of Geojit Financial Services, Trump's uncertainty is exacerbating global trade tensions. The retaliation for these Trump tariffs has yet to be determined. He acknowledged that there would undoubtedly be responses.
"If Trump's tariff policy continues and soon affects other countries, it will be bad for global trade and the global economy. India won't be spared. There is one factor that will keep Trump in check: the market reaction," Vijayakumar said.
According to Vijayakumar, tariffs will soon raise inflation in the United States, making the Federal Reserve more hawkish. He warned that the US stock market, which is currently priced to perfection, could experience a severe correction, if not a crash.
"This outcome, which Trump despises, has the potential to calm him down and restore some sanity and balance to his policies. We're not sure when this will happen. Even though valuations are reasonable, there is no chance of a recovery in the Indian market in the near future. "Investors should exercise caution and wait to see how the situation unfolds," he said.
US President Donald Trump announced that 25% tariffs on Mexican and Canadian imports would begin on Tuesday, with no room for delay. In retaliation, Canada imposed a 25% tariff on $107 billion worth of US goods, kicking off the tariff war.
"In addition, the US government's decision to impose new tariffs on China beginning March 4 has raised concerns about the potential impact on inflation, adding to volatility in global markets. Investors remain cautious as they assess the long-term implications of these trade restrictions," said Ashutosh Mishra, Head of Institutional Equity Research at Ashika Stock Broking.
Nomura said the 10% tariff on China brings cumulative tariffs on China to 20% in less than one and a half months of Trump's new presidency, raising average US tariff rates on China to around 33%, according to its estimates.
"We believe Trump's apparent soft stance on China in recent weeks was purely tactical, with markets potentially underestimating his determination to curb China and his intention to pursue bolder measures in his second term. While markets are currently overlooking these risks, they may take center stage in the coming months," it cautioned
