Mumbai: Indian equity markets faced severe selling pressure on Monday, February 3, 2025, with benchmark indices recording significant losses. The BSE Sensex plummeted 750 points (0.96%) to touch an intraday low of 76,756.09, while the NSE Nifty declined 260 points (1.1%) to 23,222.
Early trading saw major companies contributing to the decline. On the BSE, Power Grid, NTPC, Tata Steel, Tata Motors, and Larsen & Toubro emerged as the top laggards. The NSE witnessed similar pressure, with Bharat Electronics, BPCL, Coal India, ONGC, and NTPC leading the losses.
Key Factors Behind the Market Decline
1. Trump's New Tariff Measures
President Donald Trump's recent implementation of substantial tariffs has sent shockwaves through global markets. The measures include:
- 25% duties on Canada and Mexico
- 10% tariffs on China
- Justification cited as combating illegal immigration and drug trade
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that despite India's excellent Budget, markets remain under pressure from these tariffs and the resulting global uncertainty. While China has taken a diplomatic approach by approaching the WTO, Mexico and Canada have responded with retaliatory measures.
2. Global Market Weakness
Asian markets demonstrated significant weakness, with Japan's Nikkei dropping 2.56% and Australia's ASX 200 declining 1.83%. Chinese markets remained closed for the New Year celebration. Japan's manufacturing sector showed particular weakness, with the au Jibun Bank Japan manufacturing PMI falling to 48.7 in January.
3. Budget 2025 Impact
Finance Minister Nirmala Sitharaman's Budget 2025-26 raised concerns with its capex allocation. The new target of Rs 11.2 trillion for FY26 fell below market expectations, especially considering the government is likely to miss its FY25 target by Rs 93,000 crore. This disappointment particularly affected capital goods stocks, with the BSE Capital Goods index dropping 4.45%.
4. FII Selling Pressure
Foreign Institutional Investors (FIIs) maintained their selling stance, offloading Rs 1,327.09 crore worth of Indian equities post-budget. According to Chokkalingam G, Founder of Equinomics Research Pvt Ltd, this selling pressure might persist until March 2025 as investors await currency stabilization.
Broader Market Impact
The selling pressure extended beyond large-caps, affecting the broader markets significantly:
- BSE Midcap and Smallcap indices fell over 1%
- Notable declines in midcap stocks included:
- Hindustan Petroleum and RVNL (over 6% decline)
- NMDC and SAIL (over 5% decline)
- Mazagon Dock, IREDA, and Cummins India (over 4% decline)
- Smallcap segment witnessed sharp drops in:
- Bharat Dynamics (over 8%)
- Jupiter Wagons and JP Power (over 7%)
- Garden Reach Shipbuilders, Power Mech, and HUDCO (over 6%)
Sectoral performance remained predominantly negative, with Nifty Metal being particularly affected, dropping over 3%. Nifty Pharma stood as the sole sector showing resilience in positive territory.
