Nifty, Sensex sink to seven-month low amid jitters over Trump’s swearing-in | Stock Market News

Mumbai: Donald Trump’s sabre-rattling before and after his swearing-in sent the Indian markets scurrying for cover on Tuesday, with benchmarks Nifty 50 and S&P BSE Sensex tumbling to their respective seven-month lows.

Investors were already in a sombre mood, thanks to sluggish corporate earnings, foreign investor sell-offs, and pre-budget jitters. The uncertainty sparked by the new US president’s assertions and executive actions on his day one in office only added fuel to the fire.

The Nifty 50 fell 1.4% to close at 23,024.65, while the Sensex slumped 1.6%, ending the day at 75,838.36. Further, all sectoral indices closed in the red on Tuesday, with Nifty Realty and Consumer Durables taking the biggest hits, falling by more than 4% each.

Provisional data shows that foreign institutional investors (FIIs) net sold Indian equities worth ₹5,920 crore on Tuesday, while domestic institutional investors (DIIs) net bought stocks worth ₹3,500 crore. As of Tuesday, FIIs have offloaded a staggering ₹52,317 crore worth of Indian equities this month, while DIIs have been on a buying spree, net purchasing ₹57,189 crore.

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“Today’s market fall reflects a mix of global and domestic concerns,” said Shripal Shah, managing director and CEO of Kotak Securities. With Trump back in power and announcing new tariff measures, global markets have turned cautious, he explained. “Domestically, continued FII selling, weaker Q3 earnings trends, and softer guidance from new-age tech companies like Zomato are adding to the uncertainty ahead of the Union budget.”

With the Nifty 50 dropping below the 23,000 mark during the day on Tuesday, further declines could be on the horizon, said technical chartists. “The index might slide to 22,400 or even 21,800,” said Kkunal Parar, vice president at Choice Equity Broking.

Triumphant Trump

Speaking at a press briefing in the Oval Office shortly after being sworn in as the 47th US President on Monday, Trump reiterated his intent to impose 100% import tariffs on BRICS nations if they moved to reduce reliance on the US dollar in global trade. The BRICS bloc comprises Brazil, Russia, China, South Africa, and India.

In a blow to the climate change mitigation movement, Trump signed an executive order withdrawing from the Paris Agreement. In other signoffs, he pulled the US out of the World Health Organization, sought to promote oil and gas development in Alaska, and signed a raft of other orders and promised many more, including a 25% tariff on imports from Canada and Mexico starting 1 February.

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Saurabh Mukherjea, founder and chief investment officer at Marcellus Investment Managers, suggests that if Trump’s actions don’t match his tough talk, core inflation and US bond yields might soften. But he believes the dollar is likely to stay strong for now.

He highlights two main reasons for the correction in Indian equities: a slowing economy and high valuations, which are driving FIIs toward US markets. Adding fuel to the fire is the dollar’s rally, boosted by Trump’s political comeback, making Indian stocks less appealing to global investors.

Strands of optimism

Nirav Karkera, head of research at Fisdom, said there is some definite nervousness around Trump’s immediate agenda, which indicates a strong commitment to protectionist trade policies.

“It looks like the dollar might keep strengthening, against which the rupee might find it difficult to maintain value at current ranges,” Karkera said. Though healthy, India’s macroeconomic situation is yet to accelerate with reasonable momentum, Karkera added, while pointing out that the long-term growth story still looks solid.

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Kotak’s Shah, too, remains optimistic, saying that India remains the fastest-growing major economy in the world, and with markets approaching reasonable valuations, investors can consider gradually deploying funds over the next few months.

Even Ben Powell, chief Middle East and APAC investment strategist at BlackRock Investment Institute, agreed that “India stands out as one of the world’s fastest-growing major economies, with GDP growth projected to reach 6.5% in 2025, according to the International Monetary Fund – well above global and emerging market averages”.

On the domestic front, Indian stocks could face more pressure as the RBI keeps liquidity tight to stabilize the rupee, said Mukherjea. He expects the government to step in with fiscal support, giving the RBI some leeway to ease liquidity. He also predicts efforts to grow bank deposits, even if it means money flowing out of the stock market and into the banking system.

Eyes on the budget

Finance minister Nirmala Sitharaman is set to present the Union budget for FY25-26 on 1 February. Over the years, the budget’s influence on the equity market has diminished significantly, as the government has increasingly implemented key reforms outside its framework.

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The first half of FY25 presented several challenges, including a notable reduction in government spending, tightened credit in unsecured lending, a slowdown in urban consumption, extended monsoon conditions, and persistent inflation.

Together, these factors have weighed heavily on corporate earnings, contributing to the slowdown witnessed during the period. “Against this backdrop, the market participants continue to view the FY26 budget as a critical catalyst for stimulating the Indian economy’s growth and, thereby, the Indian market,” read a pre-Budget expectation note by Axis Securities.

Dhiraj Relli, managing director and CEO of HDFC Securities, is of the view that the budget expectations are centred around potential reforms and fiscal measures that could boost various sectors and maintain India’s growth momentum.

“This budget is expected to address key issues such as FDI (foreign direct investment), fiscal deficit, disinvestment, and energy transition, but also restore investor and public confidence in the government’s ability to steer the economy through challenging times,” he said.