Equity markets tanked more than 1.3 per cent on Tuesday, as the relentless selling by foreign institutional investors continued with the dollar continuing to gain strength and the US President Donald Trump firing fresh salvo in an escalating trade war, this time targeting steel and aluminium imports.
The BSE Sensex tumbled 1,018 points to close at 76,293.60 level and the NSE Nifty 50 closed 309 points lower at 23,071.80 level. In 2025, the benchmark Sensex has declined 2.4 per cent so far, amid continued FII selling. Till February 11, foreign portfolio investors have sold Rs 88,139 crore from India's equity market, according to data from NSDL.
Amid the FII sell-off and dollar continuing to gain strength, the rupee has continued to fall; hitting a new low of Rs 87.95 on Monday before pulling back.
“The Steel Manufacturers Association applauds President Trump for putting the American steel industry and its workers first by imposing a 25 percent tariff on all steel imports.” pic.twitter.com/ibU9QCZV3C
— Rapid Response 47 (@RapidResponse47) February 11, 2025
Not surprisingly, metal stocks saw a huge sell-off on Tuesday, after Trump raised tariffs on import of steel and aluminium to a flat 25 per cent, without any country exceptions. The hope is it will give the struggling US industries a lift, but it also raises the spectre of opening another front in the trade war and retaliations from other countries.
Among the key metal stocks, Tata Steel, Vedanta, NMDC, National Aluminium, Hindustan Zinc, Jindal Stainless Steel Authority of India declined between 3 per cent to over 4.5 per cent.
Banking and finance companies, consumer goods, automobiles and technology stocks were among the other major losers on Tuesday. Among the 30-share Sensex, Bharti Airtel was the lone gainer, rising 0.2 per cent from previous close.
Midcaps and smallcaps, which had rallied sharply over the past year, continue to see deeper cuts. The smallcap index slumped 3.4 per cent on Tuesday and the midcap index declined 2.9 per cent. So, far in 2025, the BSE midcap index is down near 12 per cent and the smallcap index has fallen more than 14 per cent.
According to Prashant Tapse, senior VP research at Mehta Equities, there was widespread selling on Tuesday "mainly ignited by worries over escalating tariff war" following the tariffs imposed on steel and aluminium, which "would hurt India's business prsopects."
"The mood is already sombre because of likely prospects of subdued government spending going ahead and dismal earnings show so far, which has created uncertainty among the investors and prompted them to offload their equity holdings," said Tapse.
HSBC Global Research highlighted on Tuesday that India's equities were struggling amid slowing growth and US bond yields as well as forex pressure keeping foreign investors on the edge.
"The consumption-oriented proposals in the recent budget may not be enough to turn around the downbeat sentiment, but the fiscal discipline exhibited by the government gives the central bank room to turn less restrictive. Monetary policy, amidst falling inflation, will have to play a bigger role to revive growth," it said.
HSBC expects India's premium multiple valuation to remain under pressure till earnings stabilise.
"Financial year third quarter results were below estimates, even amid the backdrop of lowered expectations. Growth is likely to remain weak for at least two quarters before the lower base or potential policy impact kicks in," it said.
HSBC still sees pockets of growth. For instance, the recent sell-off has created a good opportunity for companies with a strong or improving growth narrative, it noted. It further said that recent results affirmed improving growth prospects for software companies and the sector also benefited from the weak rupee. Separately, a less restrictive monetary policy will be good for lenders struggling for capital, it added. It also likes consumer companies that benefit from the recovery in rural demand.
