Global Trade Tensions Jolt Indian Equities, Trigger Sharpest Decline In 10 Months

Indian equity markets plunged on Monday, echoing global turmoil fuelled by escalating tariffdisputes. The BSE Sensex tumbled by 2,226 points to close at 73,137.90, while the Nifty 50 slumped 742 points to settle at 22,161.60 — a 3.2% fall, marking their steepest single-day decline since June 2024.

The sell-off in Indian equities was not an isolated event. It formed part of a wider global equity rout, sparked by the US administration’s unexpected imposition of sweeping tariffs on imports — a move that unsettled financial markets worldwide and reignited fears of a prolonged trade war. President Donald Trump defended the decision as “medicine,” even as the announcement sent shockwaves across global investor communities.

Analysts criticised the tariffs as arbitrary and lacking economic coherence, a move that disrupted market expectations and provoked an immediate response from China. In a significant departure from its typically measured approach, Beijing imposed a blanket 34% tariff on US imports, signalling a more aggressive stance. This retaliatory measure rattled markets further, leading to a heavy sell-off on Wall Street, where Dow Jones futures fell 1,376 points, adding to last week's 2,231-point drop.

Asian markets also witnessed steep declines, with Japan’s Nikkei losing nearly 8%. European indices followed suit, trading 5-6% lower, intensifying fears of a global recession.

The carnage in Indian markets was widespread. The Nifty Metal index plummeted 6.8%, led by export-sensitive stocks such as TATA Steel, JSW Steel, and Hindalco. The Realty index dropped 5.7%, while PSU Bank, Auto, Energy, Media, and IT indices all declined between 3% and 4%. Mid-cap and small-cap stocks — typically the first to bear the brunt of global risk aversion — also fell, by 3.6% and 3.8%, respectively.

Volatility spiked sharply, with the India VIX — a gauge of market fear — surging 65.7% to 22.79, up from 13.76 on Friday.

Concerns are mounting over a potential slowdown in global demand, which could impact earnings growth for export-oriented companies, already under pressure from protectionist policies.

Until greater clarity emerges on the future of US-China trade relations, volatility is expected to continue. Investors should prepare for a prolonged period of uncertainty, with further turbulence anticipated in Tuesday’s session.