Live Market Update: The Indian stock market, including the Sensex and Nifty, opened much lower on Monday due to negative signals from Asian markets. This drop came after US President Donald Trump imposed new tariffs on Canada, Mexico, and China, sparking fears of a wider trade war.
At 9:17 AM, the BSE Sensex had fallen by 695 points (0.91%) to 76,812, and the Nifty50 dropped by 211 points (0.90%) to 23,271.
What Caused the Stock Market Crash?
- Trump’s Tariffs Raised Trade War Concerns:
Over the weekend, Trump announced a 25% tariff on Canada and Mexico and a 10% tariff on China. These tariffs were aimed at issues like migration and drug flow into the US. In response, Canada and Mexico promised to retaliate, and China said it would challenge the tariffs at the World Trade Organization. This raised fears of a global trade war, which could slow down the world economy. - Rising US Treasury Yields:
US two-year Treasury yields rose to 4.274%, the highest in a week. Higher yields often attract investors to the US, pulling money out of emerging markets like India. This can weaken local currencies and increase borrowing costs. - Indian Rupee Weakens:
The US dollar strengthened to record levels against several currencies, including the Chinese yuan, Canadian dollar, and Mexican peso. The Indian rupee also weakened, crossing Rs 87 per US dollar for the first time. This was driven by the dollar’s strength following Trump’s tariff decisions.Expert View: Dr. V K Vijayakumar from Geojit Financial Services said, “India is not directly affected by these tariffs yet, but the stronger dollar might lead to more selling by foreign investors, putting pressure on the Indian market.” - Weak Global Market Sentiment:
Asian markets like Japan’s Nikkei and South Korea’s KOSPI fell by 3% on Monday, reacting to fears of a global trade war. This negative global mood affected the Indian stock market as well. - Caution Ahead of RBI Policy Meeting:
With the Union Budget completed, investors are now focused on the Reserve Bank of India’s Monetary Policy Committee meeting. Experts expect a 25 basis point interest rate cut to boost consumption and economic growth after recent tax reforms. - Foreign Investors Pulling Out Funds:
Since October 2024, foreign institutional investors (FIIs) have been selling Indian stocks heavily. From October 1, 2024, to February 1, 2025, FIIs sold Indian shares worth nearly ₹2.7 lakh crore. This consistent selling has weakened investor confidence and pushed the market down.
Market Performance Later in the Day:
Although the market recovered some losses later, it still closed lower. The BSE Sensex ended the day down 319.22 points (0.41%) at 77,186.74. The Nifty50 also closed 121.10 points lower (0.52%) at 23,361.05.
Conclusion:
The stock market’s fall on February 3 was mainly due to Trump’s new tariffs, which sparked fears of a global trade war, rising US Treasury yields, a weaker Indian rupee, and continued selling by foreign investors.