Bears ruled the Dalal Street on the first day of the new financial year. There was a huge sell-off across the market amid worries over the impact of the looming reciprocal tariffs that US President Donald Trump plans to announce on April 2, apart from profit booking after recent gains, which sent the benchmark indices down over 1.5 per cent.
The BSE Sensex closed the session at 76,024.51, down 1,390.41 points or 1.8 per cent and the NSE Nifty50 index was down around 354 points or 1.5 per cent to 23,165.70 level.
"Investors slashed their equity bets ahead of the start of Trump's reciprocal tariff imposition on imported goods from Wednesday, as the decision is expected to affect the advantage India had over the US for many years," said Prashant Tapse, senior vice-president (research) at Mehta Equities.
India has traditionally had a trade surplus with United States. The reciprocal tariffs as well as a potential slowdown in the could hurt Indian exports.
Of the 30-share Sensex, 28 stocks ended in the red. IT stocks were among the biggest losers on the market on Tuesday. HCL Technologies was down 3.9 per cent, Infosys fell 2.7 per cent, and Tech Mahindra, TCS declined around 1.5 per cent each. Tech stocks will kickstart the fourth quarter earnings next week. While the general expectation was growth to remain tepid, some feel the actual outcome could be worse given the continued economic uncertainty in the US. Goldman Sachs has raised the probability of a recession in the US to 35 per cent from 20 per cent.
"A weak fourth quarter was in the guide. Elevated uncertainty - both regulatory and economic - means actual performance could turn out to be weaker," said Abhishek Kumar of JM Financial Institutional Securities. The analyst noted that recovery in discretionary spend was less visible and therefore the spotlight will be back on larger deals.
Banking and finance companies too were under selling pressure on Tuesday. Bajaj Finserv, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Axis Bank, all declined between 1.20-3.50 per cent. All eyes will be on the Reserve Bank of India's monetary policy committee meeting next week. Following a 25 bps cut in repo rate in February the MPC is expected to cut rate by another 25 bps this time around amid cooling inflation.
IndusInd Bank, however, surged more than 5 per cent after reports indicated that the private sector lender through multiple deals had highly rated corporate loans to some of its rivals to shore up its liquidity. This comes on the back of recent revelation that it had noted discrepancies during an internal process review related to its derivatives portfolio and that it expected a hit on its networth. It is also carrying out an independent review in the case.
Pharma companies also have heavy selling on Tuesday, considering the US is a major market for many players and they could be impacted by Trump's tariffs announcement.
Tuesday's selloff should also be seen in the backdrop of the gains markets saw in March, with some investors now likely choosing to book profits ahead of the tariffs announcement by Trump.
"India outperformed most markets in March with 6.3 per cent return. If the tariffs are lower-than-feared, there can be a rally in the market, which will be led by externally linked sectors like pharmaceuticals and IT. On the other hand, if the tariffs are severe, there can be another round of downturn in the market," said VK Vijayakumar, chief investment stragetist at Geojit Investments.