The global carnage has had its impact in India too. The Sensex and the Nifty are both down 1% each and the broader market see further damage. The BSE Smallcap Index is down nearly 3% and the BSE Midcap Index is down 2%. The big Index losers include metal stocks, pharma and IT. ONGC, Vedanta, Tata Steel, Cipla Tata Motors are all down over 5% each.
Siddarth Bhamre, Head Institutional Research-Asit C. Mehta Investments Intermediates explained that while, “Yesterday markets came off lows quickly because investors felt that India is better placed compared to peers. However, now the response is more measured and investors are worried about the possibility of recession globally and its impact on India. If growth becomes a challenge globally, India won’t be spared either. There are concerns about the tariff calculation method and US President Trump’s commentary is not sync with international trade policies. I would expect more negotiations over the next 3-6 months and perhaps US will come to terms with reality. We may see some kind of recalibration after that.”
Four reasons why markets are falling today
The markets have been spooked by the carnage globally-
Recession fears in US
As the investors and experts go through the details of the tariff announced, increasingly fears of recession and heightened inflation in US is worrying investors. According to market expert, Ajay Bagga, “Markets worried on global overhang, if US markets go into a bear territory, a global risk off move will tighten capital and portfolio flows into the EMs as well. . US exceptionalism on economic and market front is being questioned. Flows moving out of the US. US consumer and business sentiment is at a decadal low. All this is getting transmitted into poor sentiment globally. America First is becoming America Alone in a once-in-a-century isolationist, protectionist policy regime.
Pharma stocks bleed on worries about new surprises
The Trump tariff announcement has exempted the pharma sector thus far. While we did see an immediate relief rally, concerns about future tariff has been weighing on sentiment. Experts and market observer pointed out that these exemptions need to be seen with caution. They believe that it is possible that there is a closer inspection of these sectors and may see a category-specific tariff levy in the future.”
Tech stocks crack: Nifty IT Index down 7% in 5 days
The tech stocks have been one of the biggest casualties of the decline in the market. Given the sharp fall in the last two days, the Nifty IT Index is now down 7% over the last 5 trading sessions. Concerns about recession in US hit the sentiment as there are now worries about future demand outlook. It does not help that industry biggies like Cognizant reduced the margin guidance indicating shrinking demand. Most big brokerage houses including Motilal Oswal, Kotak and JM Financial have put out cautious outlook for the tech companies in Q4.
Market expert Bagga added that, “Domestic: Infotech sector revenues under threat due to US and global slow down. Export linked sectors from jewellery to textiles to electronics exports to auto ancillary exports to take a margin and volumes hit due to Trump Tariffs.”
Q4 earnings set to be weak
All eyes are on the Q4 results season starting soon. The demand environment hasn’t seen a significant improvement. According to Bhamre, “earnings in Q4 are going to weak. Overall valuations are now in a reasonable band and there are no tailwinds as such for the stock market. Earnings will decide individual stock performance. Stock market response will be based on specific stock performance. The way Dabur was punished after the not so encouraging business update is perhaps the way forward in Q4.”