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Investors Lose Rs 7.46 Lakh Crore as Markets Crash Amid Trump’s Tariff Threats

Reporter 12
28 Feb, 2025

In a dramatic turn of events, the Indian stock market witnessed a massive sell-off on Friday, wiping out a staggering Rs 7.46 lakh crore of investor wealth in morning trade. The benchmark Sensex plummeted by 1,032.99 points, or 1.38%, to 73,579.44, as global markets reacted sharply to fresh tariff threats from former U.S. President Donald Trump. The bearish trend in global equities, coupled with relentless foreign fund outflows, sent shockwaves through the domestic market, leaving investors reeling.

Trump’s Tariff Threats Spark Global Panic

The market crash was triggered by Donald Trump’s latest announcement of imposing additional tariffs on Chinese imports, reigniting fears of a global trade war. Trump’s aggressive stance on trade policies has long been a source of uncertainty for global markets, and his recent threats have only added to the volatility. The U.S. markets had already closed sharply lower on Thursday, with the Dow Jones Industrial Average hitting a five-month low. This bearish sentiment spilled over into Asian markets, where indices in Seoul, Tokyo, Shanghai, and Hong Kong were trading deep in the red.

Vikas Jain, Head of Research at Reliance Securities, commented, “The US market fell, closing at a five-month low, while US Treasury yields rose following President Donald Trump's new tariff threats. This has created a ripple effect across global markets, including India.”

Market Capitalisation Takes a Hit

The sharp decline in equities led to a significant erosion of market capitalisation for BSE-listed firms, which dropped by Rs 7.46 lakh crore to Rs 385.63 lakh crore (approximately USD 4.42 trillion) during morning trade. This massive loss of investor wealth underscores the fragility of market sentiment in the face of global economic uncertainties.

Sensex and Nifty: A Sea of Red

The 30-share BSE Sensex and the broader Nifty 50 both experienced heavy losses, with several key stocks taking a beating. From the Sensex pack, Tech Mahindra, IndusInd Bank, Maruti Suzuki, HCL Tech, Tata Consultancy Services (TCS), Infosys, Mahindra & Mahindra, and Titan were among the biggest laggards. On the other hand, Axis Bank, HDFC Bank, Reliance Industries, and Adani Ports managed to buck the trend and emerge as gainers.

The Nifty 50 also mirrored the Sensex’s decline, slipping below the 22,300 mark. The sell-off was broad-based, with sectors like IT, banking, and auto bearing the brunt of the losses. The IT sector, in particular, was hit hard due to its heavy reliance on global markets, especially the U.S.

Foreign Institutional Investors (FIIs) Continue Selling Spree

Adding to the market’s woes, foreign institutional investors (FIIs) have been on a selling spree, offloading equities worth Rs 556.56 crore on Thursday, according to exchange data. The relentless outflow of foreign funds has further dampened investor sentiment, as FIIs play a crucial role in driving liquidity and stability in the Indian markets.

Geopolitical Uncertainty Weighs on Markets

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the impact of geopolitical uncertainty on market performance. “Stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected the US president. The spate of tariff announcements by Trump has been impacting markets, and the latest announcement of an additional 10% tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favorable to the US.”

The big question now is how China will respond to Trump’s latest tariff threats. Any escalation in trade tensions between the U.S. and China could have far-reaching consequences for global markets, including India.

Oil Prices Add to the Gloom

Global oil benchmark Brent crude also dipped by 0.51% to USD 73.66 a barrel, adding to the overall gloom in the markets. Rising oil prices have been a persistent concern for India, which is heavily reliant on imports to meet its energy needs. Any further increase in oil prices could exacerbate inflationary pressures and weigh on the country’s economic recovery.

What Lies Ahead for Investors?

The sharp market correction has left investors wondering what lies ahead. While the immediate outlook remains uncertain, experts advise caution and recommend focusing on fundamentally strong stocks with robust growth potential. V K Vijayakumar added, “In such volatile times, it is crucial for investors to stay calm and avoid panic selling. Markets tend to recover over time, and quality stocks will eventually bounce back.”

However, the road to recovery may be bumpy, as global trade tensions and geopolitical uncertainties continue to loom large. Investors will be closely watching how the U.S.-China trade negotiations unfold and whether Trump’s tariff threats materialize into concrete actions.

Conclusion: A Wake-Up Call for Investors

The massive market crash on Friday serves as a stark reminder of the inherent volatility and risks associated with equity investments. While the Indian economy remains resilient, global headwinds such as trade wars, rising oil prices, and foreign fund outflows can significantly impact market performance.

As the dust settles, investors are advised to stay informed, diversify their portfolios, and adopt a long-term perspective. While the short-term outlook may be uncertain, history has shown that markets tend to recover and reward patient investors. For now, all eyes are on how global events unfold and whether the Indian markets can weather the storm.

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