Stock Market Crashed After Trump's New Tariffs; Why Sensex Fell 1,281 Pts & Nifty Dropped 395 Pts On Feb-11?

Stock Market Crash: The Indian stock market entered into an extreme bearish trend on February 11th, with Sensex nosediving by more than 1,281 points and Nifty plummeting by nearly 395 points. The bears' runover led to the erosion of more than Rs 10 lakh crore in wealth in a single day on Dalal Street. India's volatility index surged over 4%, while midcap and smallcap stocks dragged the broader market.

The latest panic in domestic equities emerged after brokerages like Nomura and Morgan Stanley saw India to face the brunt of Trump's fresh tariff plans on steels. Meanwhile, FIIs continue to relentlessly pull out money from Indian stocks.

As per the experts, FIIs will turn buyers when the dollar index weakens. The US currency has maintained its rally above 108.3 levels, as Trump signed new orders of imposing 25% tariffs on steel and aluminium imports "without exceptions or exemptions." Nifty Metal index plunged by more than 1.5%.

Overall, broad-based selloffs have toppled Sensex and Nifty from their support levels. Sensex is below its 20-day EMA of 77,464, 100-day EMA of 78,703, and 200-EMA of 77,843.

While Nifty 50 is below its 20-day EMA of 23,435, 100-day EMA of 23,874, and 200-day EMA of 23,617. Currently, both Sensex and Nifty's moving and technical averages are on a bearish trend.

Sensex, Nifty:

Sensex nosedived by 1,281.21 points to hit an intraday low of 76,030.59. Currently, the index traded at 76,154.78, down by 1157.02 or 1.50%.

Heavyweights like Zomato, Power Grid, Tata Motors, Tata Steel, L&T, Hindustan Unilever, Kotak Bank, Ultratech Cement, ITC, Adani Ports, TCS, Asian Paints, Bajaj Finance, Nestle, Reliance, and NTPC plunged by 1.5% to 5.5%.

BSE SENSEX Next 50 was in a free fall of 2,141.35 points or 2.8%.

Meanwhile, Nifty 50 dropped by 394.95 points to hit an intraday low of 22,986.65. The 50-scrip index traded at 23,019.75, down by 361.85 points or 1.55% during the time of writing. Nifty Midcap 100 and Nifty Smallcap 100 indexes plunged by nearly 4%, dragging the market the most.

Bank Nifty shed 1.41%. The major draggers were Nifty Auto, Nifty FMCG, Nifty Financials, Nifty Media, Nifty Metal, Nifty Pharma, Nifty PSU Bank, Nifty Realty, and Nifty Oil & Gas that dipped by 2% to 4%.

As per Nomura, emerging Asian economies have higher relative tariff rates on US exports, and this puts them at risk of higher reciprocal tariffs. The brokerage expects Asian countries to emerge into negotiation talks with Trump.

A Charles Schwab report said, "There could be more to come with Trump having threatened across-the-board import tariffs that would apply to all U.S. imports and imposing tariffs on U.S. imports equal to rates that trading partners impose on U.S. exports he has referred to as "reciprocal tariffs." Although the latter could potentially move tariffs lower if other countries lower their tariff rates in response to the threat, as India already did in early February on some products and the European Union (EU) reportedly discussed regarding autos."

It further said, "A tariff delay could still pose problems. Companies may pre-emptively raise prices, lifting inflation (as has already been reported for U.S. steel companies) while holding back on investment given the uncertainty."

Nomura report also said that India may likely consider trimming tariffs on over 30 items, and increase its defence and energy products purchase to curb higher reciprocal tariffs from the US.

Hopes of cooling Trump's intense tariff plan emerged as PM Narendra Modi is scheduled for his US trip from February 12-13. As per reports, PM Modi is looking forward to meeting his friend Trump and discuss opportunities to build successful bilateral cooperation.

When Could Market See Fresh Buying?

As per Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the significant trend in the ongoing bearish phase of the market is the outperformance of large caps over the broader market. While the Nifty Midcap and Smallcap indices are down 8.6% and 11.3% respectively YTD, the Nifty is down only 1.52%. This outperformance is likely to continue, going forward.

Vijayakumar added, that the relentless selling by FIIs in largecaps has made their valuations fair while the valuations of mid and smallcaps continue to be excessive. FIIs will certainly turn buyers in India, but that will happen only when the dollar index turns weak. We know that it will happen, but don't know when. What investors have to do now is to buy quality large-caps in banking, IT, autos, pharma and capital goods and wait patiently. When FIIs turn buyers in India, which is inevitable, they will be buying the large caps which they are selling now. For patient investors, this is a good opportunity.

Trump's latest decision to impose 25% tariffs on steel and aluminium will impact countries like Mexico, Brazil, South Korea and Vietnam more. Metal prices will remain soft for long, he lastly said.