Markets in freefall: Nifty 50, Sensex down 16% from peak as global trade tensions escalate

Indian stock market crash: Mounting global trade tensions have rattled investor confidence in risky assets, leading to a wave of selling in Asian equities in today's session, with Indian markets being no exception. Stocks across all sectors have been witnessing heavy selling pressure since the opening bell, causing the Nifty 50 to lose 440 points in trade and touch the day's low of 22,105 points.

Today's selling has pushed the index down by 4,172 points (16%) from its September peak of 26,277 points. Likewise, the Sensex has tumbled 12,819 points (15%) from its peak of 85,978. In today's session alone, Sensex has plunged 1,453 points to the day's low of 73,159.

Both indices have declined by up to 5.5% so far this month and are on track to record five consecutive months of decline in February—an extremely rare occurrence. For the Nifty 50, this marks its first five-month losing streak since 1996 and the second-worst monthly decline since the index’s launch in July 1990.

The broader market has seen more intense selling pressure as valuation concerns continue to weigh on investor sentiment, resulting in a more severe fall. The Nifty Midcap 100 index plunged nearly 3.4% in today's session to 47,485 points, causing it to drop 22% from its peak.

Likewise, the Nifty Smallcap 100 index skidded 3.55%, touching the day's low of 14,617 points, resulting in a 26% correction from its peak of 19,640 points.

Meanwhile, 30 constituents of the Nifty 50 are now trading 20-47% below their one-year highs, with Tata Motors emerging as the top laggard, dropping 47%. Among the Nifty Midcap 100 index, Vodafone Idea is the worst-performing stock, down 60% from its peak, while Sterling and Wilson Renewable Energy is the top laggard in the small-cap segment, falling 70% from its one-year peak.

Tariff worries drive investors away from risky assets

It appears that investor confidence in Indian equities is waning due to a combination of domestic and global factors. Rising trade tensions are weighing more heavily on investor sentiment and prompting overseas investors to exit equities, particularly in emerging markets like India.

FPIs have remained net sellers since October, steadily offloading their holdings at an accelerating pace. In just five months (October 2024-February 2025), they pulled out ₹3.11 lakh crore from Indian exchanges, leaving domestic investors to absorb the entire selling pressure.

Trump announced on Thursday that his proposed tariffs on Mexico and Canada will take effect on March 4, following a one-month pause. He claimed that both countries had not done enough to curb the flow of drugs across the border.

He also stated that China, which is already subject to 10% tariffs from the U.S., would face an additional 10% levy. The unveiling of new tariffs on Chinese imports increases the risk of Beijing retaliating, escalating tensions between the world's two largest economies. Furthermore, Trump has threatened to impose a 25% tariff on imports from the European Union.

Last week, he proposed a 25% tariff on automobile, semiconductor, and pharmaceutical imports, with reports suggesting an official announcement could come as soon as April 2. His administration is also working on reciprocal tariffs on all countries that impose tariffs on U.S. goods or implement non-tariff barriers restricting U.S. market access.

Trump’s trade actions are not only unsettling investors but also U.S. consumers and the Federal Reserve. Consumers are increasingly worried about a potential rise in domestic prices if tariffs take effect, which could slow down economic growth.

Meanwhile, his aggressive trade stance is complicating the Federal Reserve’s monetary policy. Having worked to bring inflation down to near its 2% target, the Fed is now more concerned about the rise in prices, which has already influenced policymakers to pause rate cuts in January.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.