Market in free fall mode: Sensex plunges 1,000 pts, Nifty slips below 22,300 ahead of Q3 GDP

Indian share market witnessed sharp selling on Friday, with the equity benchmarks BSE Sensex and NSE Nifty slipped up to 1.4% in early trade amid broad-based selling across indices. The Sensex slipped over 1,000 points in the first hour of trade so far, while the Nifty50 dropped around 300 points, while the mid and small cap indices nosedived over 2% as investors turned cautious ahead of December quarter gross domestic product (GDP) numbers slated to be released today.

In the early trade, the 30-share sensex dropped as much as 1,010 points, or 1.35%, to hit a low of 73,602 level. Similarly, the Nifty50 crashed 321 points, or 1.4%, to 22,224 mark. The broader market witnessed sharp correction, with the BSE midcap and BSE smallcap indices crashing over 2.5% each.

On the BSE Sensex pack, 26 out of 30 stocks were flashing in negative terrain, barring Reliance Industries, ICICI Bank, HDFC Bank, and Axis Bank, which were marginally up. On the other hand, M&M, Tech Mahindra, IndusInd Bank, HCL Tech, and Maruti were top losers, falling between 3-5%. Tata group stocks - TCS, Tata Motors, Tata Steel, and Titan – were also among notable losers, dropping up to 3%.

On the sectoral front, all indices were in red, with FMCG, Metal, Pharma, PSU Bank, Realty, Healthcare, Consumer Durables, and Oil and Gas falling up to 1%.

What fuelled sell-off in equity market?

The weakness in the domestic market was triggered by U.S. trade tariff concerns after President Donald Trump confirmed that tariffs against Canada and Mexico will come into effect from March 4. Trump also said that China will be charged an additional 10% tariff on the same date, while he threatened to impose 25% tariffs on imports from the European Union "very soon". 

“The spate of tariff announcements by Trump has been impacting markets and the latest announcement of additional 10% tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favourable to the US,” says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

“How China responds to the latest round of tariffs remains to be seen. Even now the markets have not discounted a full blown trade war between the US and China. It is likely to be avoided. However, the uncertainty element has increased as reflected in the sharp spike in CBOE volatility index to 21.13,” he says.

On Indian equity market, Vijayakumar said that the equities may witness some recovery this month backed by better macro news flows and subdued FII selling. “Since largecap valuations are fair, and in pockets attractive, FIIs are unlikely to press selling as aggressively during the last few months. Long-term investors can utilise the weakness in the market to slowly accumulate fairly-valued quality largecaps and select fairly-valued stocks in the broader market, like defence stocks for instance."

Weak global cues also dented the market sentiment. In the overnight trade, U.S. stock closed lower, with the S&P 500 falling 1.59%, the Nasdaq Composite plummeting 2.78%, and the Dow Jones Industrial Average losing 0.45%.

Tracking negative closing at Wall Street, Asian stock opened lower today, with Japan's Nikkei, Hong Kong’s Hang Seng Index, and South Korea's Kospi crashing up to 3%. China’s Shanghai Composite Index was down nearly 1% at the time of reporting.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)