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Here’s What Happened – Trump’s Growing Threat of Tariffs Caused Sensex to Drop By 1200 Points

The stock markets were incredibly volatile on Tuesday. After showing positive momentum at the start of the session, Sensex faced a severe decline and shed over 1200 points by the end of the session. One of major causes behind this slaughter was the tariff threat given by US President Donald Trump.

Reasons for Today’s Dalal Street Crash

The Indian stock market suffered a deep cut today, many factors coming together to fuel the sell off. Concerns ranged from global to domestic and here is an attempt to analyze the complete drama.

Panic Regarding Trump’s Tariff Plans

The new tariff policy by Trump has been a cause of concern since day one, but now that one of the policies is in action, the panic has only intensified. These tariffs are also expected to worsen the Indian economy on deeper levels.

Fall in Index Heavyweights

The panic selling also brought down the sales of Paese portfolio Zomato, which was the trump card in post epidemic recovery. It is also one of the most talked about and worst performing stocks as it plunged 11% on the Bombay Stock Exchange (BSE). Other nadir stocks include ICICI Bank, HDFC Bank, Reliance, and SBI.

Quarter 3 Earnings Disaster

Earning seasons have been more lukewarm in recent quarters as well, adding to the worry on Dalal scoop. A large number of companies had subpar performance in their Q3 compared to their expectations, with a small number actually doing better than anticipated.

A Bloomberg consensus estimate indicates that Nifty50 companies are expected to show a marginal growth of 3% year on year in EPS for the third quarter. Other than capital goods, health care and telecom, most industries seem to be on track to miss estimates with median profit growth being in single digits.

Soaring Volatility

There was an upward movement of volatility during the session which can be attributed to increased investor questioning. The lack of clarity on Trump’s postponed tariff announcements have kept the market on a standstill and stagnated uncertainty and market volatility.

“Had Trump executed his tariff plans, it would have elucidated the sectors to be impacted. The current lack of specifics ensures that all investors need to tread carefully leading to much longer durations of volatility,” analysts noted.

Foreign Institutional Investor Selling Grows

The net selling by foreign institutional investors (FIIs) has continued, which has added impetus to the already deteriorating scenario. As of January 20, FIIs have been net sellers of equity for over 48,000 crore rupees.

With global uncertainty, poor earnings, and negative sentiment from the investors, further volatility from the Foreign Institutional Investor exodus makes the future of Dalal Street a challenging one.