Indian Stock Market Declines Amid US-Canada Trade Tensions; Sensex Drops 150 Points, Nifty Hovers Near 22,050

Indian stock markets experienced a downturn on Tuesday, March 4, 2025, reacting to escalating trade tensions between the United States and Canada. The BSE Sensex fell by 150 points, or 0.20%, settling at 72,942, while the Nifty50 index dipped by 45 points, or 0.21%, to 22,073. This decline came as a direct consequence of US President Donald Trump’s decision to enforce tariffs on Canadian and Mexican goods starting Tuesday, which was swiftly met with retaliatory tariffs from Canada. The escalating trade conflict dampened investor sentiment, causing a ripple effect across global and Indian equity markets. Notably, Nifty breached the 22,000 mark for the first time in nine months earlier in the day, signaling a significant psychological impact on traders and investors alike.

Despite the overall bearish trend, certain sectors and stocks displayed resilience. State Bank of India (SBI) and Zomato emerged as top performers, each rallying by around 3%, bolstered by strong buying interest. Other notable gainers included Bharat Electronics, IndusInd Bank, Power Grid, Adani Enterprises, ICICI Bank, Mahindra & Mahindra (M&M), and Trent, which recorded gains of up to 2.7%. The positive momentum in these stocks provided a semblance of stability amid broader market volatility. Their upward movement was attributed to a mix of sector-specific developments and investor optimism about their growth prospects. SBI’s rally, in particular, was driven by expectations of improved asset quality and a potential interest rate easing cycle by the Reserve Bank of India (RBI) in the coming months.

On the flip side, technology and FMCG stocks bore the brunt of the market correction. Major losers on the Nifty50 included Tech Mahindra, Bharti Airtel, Eicher Motors, Titan, Infosys, Hero MotoCorp, and Britannia, which saw declines of up to 1.7%. The sell-off in tech stocks was partly triggered by concerns over the potential impact of trade tensions on global IT spending and profit margins. Additionally, FMCG stocks faced pressure due to rising input costs and worries about weakening consumer demand in the wake of inflationary trends. The Nifty IT index slipped by 0.69%, while the Nifty FMCG index dropped by 0.93%, reflecting sector-specific challenges that overshadowed the broader market dynamics.

Interestingly, the broader markets displayed signs of recovery despite the benchmark indices’ downturn. The Nifty MidCap index rose by 0.4%, while the Nifty SmallCap index advanced by a notable 1.11%, reversing their early morning losses. This uptick was driven by selective buying in fundamentally strong mid- and small-cap stocks, as investors sought to capitalize on attractive valuations and potential growth opportunities. Analysts opined that the resilience in broader markets indicated a rotation of investments from large-cap to mid- and small-cap stocks, suggesting that investors were selectively optimistic about specific segments of the market despite the overarching uncertainties.

Among sectoral indices, the Nifty PSU Bank index stood out with a gain of 2.01%, supported by expectations of capital infusions and favorable policy measures by the government. Public sector banks witnessed robust buying, indicating a positive outlook for the sector amid hopes of easing regulatory norms and improved asset quality. Analysts believe that the PSU banking space may continue to attract interest in the short term, given the government’s focus on financial sector reforms and strengthening the balance sheets of public sector banks.

Market experts suggested that the near-term direction of Indian equities would hinge significantly on developments in the US-Canada trade conflict and the broader global trade environment. The escalating tariff war has heightened uncertainties for export-oriented sectors, particularly information technology and auto, which could face margin pressures if the situation worsens. Investors were also closely monitoring upcoming macroeconomic data, including India’s GDP growth figures and global cues, for further direction. The volatility witnessed during the day underscored the heightened risk aversion among investors amid geopolitical uncertainties and the potential for extended trade hostilities.

In summary, the Indian stock markets grappled with external headwinds stemming from international trade disputes, leading to a mixed performance across sectors. While select pockets of resilience were visible, the overall sentiment remained cautious as investors awaited clarity on the geopolitical front. The focus is now likely to shift towards domestic economic indicators and central bank policies, which could provide the much-needed support to stabilize market sentiment in the coming days.

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