Markets crash: On the opening bell on Monday, both the Sensex and Nifty were down nearly 5 per cent. Here’s what led to the crash.
Indian markets took a major hit on Monday with fears of a global trade war growing after US President Donald Trump announced tariffs on all countries. The Sensex, Nifty crash was preceded by a market rout on Wall Street and other major Asian markets like Japan, Singapore and China.
On the opening bell on Monday, both the Sensex and Nifty were down nearly 5 per cent. Sensex crashed 3,939.68 points to 71,425.01 in early trade, while Nifty tumbled 1,160.8 points to 21,743.65.
Among the worst-hit shares were those of IT companies, which earn a significant revenue from the US. Tata Steel dropped over 8 per cent, followed by Tata Motors which cracked more than 7 per cent. HCL Technologies, Tech Mahindra, Infosys, Larsen & Toubro, Tata Consultancy Services and Reliance Industries were the other big laggards.
This crash is the worst opening in the Indian markets since the Covid pandemic.
Why markets are crashing
Markets across the globe have been nosediving since Donald Trump announced tarrifs on all trade partners of the US. The announcement has also raised fears of a global trade war, with several countries like China, Canada and Mexico already planning retaliatory moves.
Investors were also wagering the imminent threat of recession would outweigh the likely upward shove to inflation from tariffs.
“Both China and Japan index declined by 10 per cent and 8 per cent, respectively. This escalates the stakes in the ongoing trade war and raises concerns about a potential global recession that could affect everyone. On Friday, the US S&P 500 dropped by 6 per cent, and the Dow Jones fell more than 2,000 points, marking its worst week since the COVID-19 crisis. This came after China announced it would impose reciprocal 34 per cent tariffs on all US imports starting April 10,” Vikas Jain, Head of Research at Reliance Securities, told news agency PTI.
The sharp increase in tariffs by both the US and China could lead to higher inflation, slower global growth, and intensify trade tensions, he added.
US consumer price figures out later this week are expected to show another rise of 0.3% for March, but analysts assume it is just a matter of time before tariffs push prices sharply higher, for everything from food to cars.
Rising costs will also put pressure on company profit margins, just as the earnings season gets underway with some of the big banks due on Friday. Around 87% of US companies will report between April 11 and May 9.
“We expect during upcoming quarterly earnings calls fewer companies than usual will provide forward guidance for both 2Q and full-year 2025,” analysts at Goldman Sachs said in a note.
“Rising tariff rates will force many companies to either raise prices or accept lower profit margins,” they warned. “We expect negative revisions to consensus profit margin estimates in coming quarters.”
Trump’s new tariffs are “larger than expected”, and the economic impact on inflation and growth will be likely, said Federal Reserve Chair Jerome Powell on Friday, flagging an uncertain outlook on the US economy.
The Nasdaq index confirmed it entered a bear market on Friday, as oil prices and other commodities plunged amid a massive global market decline following Trump’s announcement of sweeping tariffs on Wednesday.
