On February 28, 2025, Indian stock indices faced a significant downturn, with both the Sensex and Nifty dropping nearly 2% during intraday trading. As of 1:57 PM, the Sensex was reported at 73,242.90, down 1,369.53 points, equating to a decline of 1.84%. Meanwhile, the Nifty stood at 22,137.15, reflecting a decrease of 407.90 points, or 1.81%.
Rising Concerns Over Tariffs
This dramatic fall in the stock markets comes amid escalating fears of a global trade conflict, particularly after the U.S. announced new tariffs. President Donald Trump confirmed that a 25% tariff on imports from Canada and Mexico would be enacted sooner than expected, effective March 4, rather than April 2. Additionally, Trump proposed an additional 10% tariff on imports from China, further exacerbating market anxieties.
V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented on the situation, stating, “The recent series of tariff announcements has significantly impacted the markets. The additional 10% tariff on China signals that the Trump administration might use its initial months in office to impose tariffs as leverage for negotiations.”
Market Sentiments and Foreign Investment
Investor sentiment remains tense as they await China’s response to these tariffs, which could potentially lead to retaliatory measures. Since taking office for his second term, Trump has reiterated the U.S. commitment to fair trade, insisting on tariff reciprocity from countries like India, which has left many investors uncertain about future market conditions.
Compounding these challenges for domestic markets is the ongoing outflow of foreign portfolio investments from India. The Sensex is currently over 12,000 points lower than its peak of 85,978 points, marking a decline of about 7% since the beginning of the year.
Economic Indicators and Market Performance
Weak economic indicators, including sluggish domestic growth, have also impacted market performance. Despite a recent reduction in the RBI’s repo rate, investor confidence has not improved, largely due to global volatility.
Over the past few years, the Sensex and Nifty have shown varying degrees of growth: approximately 9-10% in 2024, 16-17% in 2023, and a mere 3% in 2022. Concerns over GDP growth, foreign fund withdrawals, rising food prices, and a slowdown in consumption have all contributed to investor hesitation throughout 2024.
What Lies Ahead?
As the economic landscape continues to evolve, the implications of a potential trade war could reshape market dynamics. Investors are left contemplating how these developments may affect their portfolios and the broader economy. The coming weeks will be critical in determining whether markets can stabilize or if further declines are on the horizon.
This environment of uncertainty not only raises questions about immediate investments but also encourages a broader dialogue on the future of global trade relations and their impact on domestic economies. Engaging with these issues could provide investors with valuable insights into navigating this tumultuous market landscape.
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