Bloodbath In Indian Stock Market Ahead Of GDP Data And US Tariffs

On Friday, Indian stock markets commenced trading on a negative note, primarily dragged down by significant losses in the banking and IT sectors. This downturn came as market participants braced for the release of crucial GDP data, while also processing the latest tariff-related remarks from US President Donald Trump. The Sensex plummeted by 1,000 points, a 1.34% decrease, dropping to 73,602, and the Nifty50 dipped to 22,270 around 10 am. This led to a substantial Rs 7.16 lakh crore decrease in the market capitalisation of all BSE-listed companies, lowering it to Rs 385.94 lakh crore.

The IT sector, particularly, faced a tough start as Nifty IT index stocks dropped by as much as 4%, mirroring the overnight Wall Street downturn caused by a sharp fall in chipmaker Nvidia. Companies like Persistent Systems, Tech Mahindra, and Mphasis were among the hardest hit. Additionally, other sectoral indices including the Nifty Auto, Bank, Metal, Pharma, Consumer Durables, and Oil & Gas all opened lower, with declines ranging between 1% and 2%.

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Concerns Ahead of GDP Data Release

One of the main drivers behind the market's negative performance is the anticipation surrounding the GDP data for the December quarter, expected to be disclosed after trading hours on Friday. Amid concerns about slowing economic growth and weakening earnings momentum, this data is being closely watched. The anxiety is further compounded by Trump's unpredictable tariff policies and persistent selling by foreign investors, which has knocked benchmarks down 14% from late September's record highs. A poll by Reuters suggests a potential economic rebound in the quarter, adding a layer of suspense for investors.

Trump's Tariff Announcements Stir Market Uncertainty

Adding to the volatility, President Trump's recent tariff announcements have heightened market uncertainty. On Thursday, he stated that the 25% tariffs on imports from Canada and Mexico would commence on March 4, deviating from the previously scheduled April 2. Furthermore, Trump declared a 10% duty on Chinese goods and reiterated his intentions to impose 25% tariffs on European Union shipments. This unpredictability concerning trade policies has significantly contributed to the market's instability.

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

Technology Stocks Bear the Brunt

The technology sector, in particular, has been under immense pressure, with major Asian markets also witnessing declines. The MSCI Asia ex-Japan index fell by 1.21%, reflecting the negative sentiment spurred by the Wall Street slump following Nvidia's sharp decline. The Nifty IT index saw a 3.2% drop, with Persistent Systems, Tech Mahindra, and Mphasis experiencing losses of up to 4.5%, as investors reacted adversely to Nvidia's earnings report, leading to a sell-off in AI-driven stocks, including other major tech companies.

Foreign Investors Pull Back

Foreign portfolio investors have significantly reduced their holdings in Indian shares, selling Rs 1,13,721 crore worth of equities on a net basis in 2025, as per NSDL data. In February alone, FIIs sold equities worth Rs 47,349 crore, while domestic institutional investors made net purchases of Rs 52,544 crore. This trend of persistent foreign investor selling adds another layer of challenge for the Indian stock market.

Dollar Strength Adds to Pressures

The escalating trade war concerns have pushed the US dollar to near multi-week highs against major currencies, further souring investor sentiment. The U.S. dollar index, a measure against six major currencies, climbed to 107.35 on Friday. This appreciation of the dollar is detrimental to emerging markets like India, as it inflates the cost of foreign investments and often results in capital outflows from equities.

In summary, the Indian stock market's downturn reflects a confluence of concerns, including anticipation of GDP data, uncertainty over Trump's trade policies, technology stock sell-offs, persistent foreign investor selling, and a strengthening US dollar. As these factors intertwine, they underscore the challenges facing investors in navigating the current market landscape.