Equity markets plunged on Tuesday, with the benchmark BSE Sensex and NSE Nifty50 falling more than 1 per cent ahead of US President Donald Trump's reciprocal tariff announcement expected on Wednesday. How these tariffs impact India's exports and the wider impact on global economy and companies has investors worried.
On Tuesday morning, the 30-share Sensex was down over 1,219 points, or 1.6 per cent, at 76,196.06 and the Nifty 50 traded 309 points or 1.3 per cent lower at 23,210.25.
Trump has said he will target all countries with reciprocal tariffs, without a cut off. Goldman Sachs on Sunday raised the probability of a recession in the US to 35 per cent from 20 per cent. It lowered USA's GDP growth forecasts for 2025 to 1.5 per cent from 2 per cent, while also cutting its year end target for the S&P 500 index.
The White House Press Secretary had recently highlighted India among several other countries for levying higher tariffs, which made it impossible for US goods to compete. It had noted that India imposed 100 per cent tariff on US agricultural products.
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; USA is a big market for Indian software services and pharmaceutical companies, for instance.
Majority of the Sensex stocks were trading in the red. Analysts will be closely eyeing corporate earnings growth for the January-March quarter.
Technology stocks, which kick off the quarterly earnings growth, were among the major losers today. TCS, HCL Tech, Tech Mahindra and Infosys were down around 2-3 per cent.
"Subpar growth should persist in Q4, as muted demand trends persist on account of weak discretionary spending and cautious behaviour by clients amid uncertain macros," said Dipeskkumar Mehta of Emkay Global Financial Services.
Increased probability of slowdown/ recession in the US with implementation of tariffs is expected to impact growth and tech spending, especially discretionary spending, Mehta said.
Banking and finance stocks also traded lower with HDFC Bank, Bajaj Finserv, Bajaj Finance, Axis Bank, Kotak Mahindra Bank and ICICI Bank down between 1-3 per cent.
Amid the global economic uncertainties, all eyes will be on the Reserve Bank of India's monetary policy committee meeting early next week. Should the US economy slow, the expectation is the Federal Reserve will cut interest rates more.
The RBI has already reduced the repo rate by 25 basis points in February and the general expectation is that cooling inflation has opened up room for another 25 basis points cut in the upcoming MPC meeting. As interest rates decline, banks could face more pressure on their net interest margins, as deposit rates have remained high in the last several months due to tight liquidity conditions. With RBI likely to continue with its liquidity easing measures, things could start reversing.
"A few medium and small private banks have cut their savings rate on select buckets, but most of the large private and public sector banks have refrained. Assuming continued efforts on liquidity, further policy rate action and beginning of lean business period, we see scope for calibrated easing in term deposit rates, going ahead," said Jai Prakash Mundhra of ICICI Securities.
Auto, consumer goods and pharma stocks were also among the losers on Tuesday.
