Indian equity markets faced a severe beating on Wednesday, with benchmark indices tumbling sharply as investors rushed to offload shares. The sell-off was triggered by renewed threats of increased tariffs on Chinese goods from the United States, sparking fears of a wider global trade war that could impact India.
Markets Tumble in Broad-Based Sell-Off
The 30-share BSE Sensex witnessed a dramatic fall, closing the day at 73,885.60 points, down by a hefty 793.25 points or 1.06 per cent. The broader NSE Nifty followed suit, dropping 234.40 points or 1.03 per cent to settle at 22,488.65. Market sentiment turned deeply negative, with the India VIX, a key fear gauge, surging by 6.69 per cent to 16.30 levels, indicating heightened investor anxiety.
The trading session on June 12, 2024, was dominated by intense selling pressure, particularly in heavyweight index constituents. Only three stocks within the Sensex pack managed to end in the green, highlighting the pervasive bearish mood. The overall market breadth was extremely weak, with a significant number of declining stocks outnumbering the gainers.
Heavyweights Lead the Decline
The market downturn was led by major blue-chip companies across key sectors. Banking and financial stocks were among the hardest hit. Axis Bank plunged by 2.92 per cent, while State Bank of India (SBI) fell by 2.43 per cent. Kotak Mahindra Bank and ICICI Bank also registered notable losses of 2.37 per cent and 1.74 per cent, respectively.
The pain was not confined to banking. IT giants, which derive a substantial portion of their revenue from exports, especially to the US, also faced selling pressure. Tech Mahindra dropped by 2.63 per cent, and Infosys declined by 1.73 per cent. Other major losers included Larsen & Toubro (L&T), down 2.59 per cent, and Tata Steel, which fell by 2.50 per cent. Reliance Industries, a key market mover, ended 1.39 per cent lower, adding to the index's woes.
Global Jitters Over US Trade Policy
The primary catalyst for the market carnage was the looming specter of heightened trade tensions. Reports indicated that the United States is considering a fresh hike in tariffs on a range of Chinese imports, including electric vehicles. This announcement reignited concerns about a potential escalation in the trade conflict between the world's two largest economies.
Analysts pointed out that such a move could disrupt global supply chains and dampen economic growth prospects worldwide. For an emerging market like India, which is integrated into the global economy, the implications are significant. Fears that protectionist measures could slow down international trade and capital flows prompted foreign institutional investors (FIIs) to adopt a risk-off approach, leading to the sell-off in Indian equities.
The BSE Midcap index fell by 1.16 per cent, and the BSE Smallcap index dropped by 0.84 per cent, confirming that the downturn was widespread and not limited to large-cap stocks alone. All major sectoral indices on the BSE, except for Healthcare, ended in negative territory. The BSE Realty index was the worst performer, crashing by 3.36 per cent.
Outlook and Investor Sentiment
The sharp correction has introduced renewed volatility into the market after a period of relative calm. Experts suggest that the immediate trigger is external and geopolitical, linked directly to US trade policy. Until there is more clarity on the scope and scale of the proposed tariff increases, markets are likely to remain jittery.
Domestic factors, such as the upcoming Union Budget and the trajectory of monsoon rains, will also play a crucial role in determining market direction in the coming weeks. However, for now, the focus of traders and investors remains firmly on global developments. The day's trading pattern underscores how sensitive Indian markets have become to shifts in global trade policy and the associated risk of economic contagion.
Investors are advised to tread with caution and look for quality stocks that may have been unduly punished in the broad market decline. The event highlights the importance of a diversified portfolio and a long-term perspective to navigate through periods of heightened global uncertainty and market volatility.
