Stock Market
Indian stock markets experienced a major drop on February 28, with the Sensex falling by 1,414.33 points (1.9%) to close at 73,198.10. The Nifty also declined by 420.35 points (1.86%) to end at 22,124.70. Out of all stocks traded, only 720 gained value, while 3,125 declined, and 83 remained unchanged. The market capitalization of BSE-listed firms fell by Rs 8.8 lakh crore, and the Nifty reached a nine-month low. This marks the Nifty 50’s fifth consecutive monthly loss, its longest losing streak in 29 years.
Key Reasons Behind the Market Decline
Trade War Concerns
Global markets are worried about a trade war after U.S. President Donald Trump announced new tariffs. On February 27, Trump stated that a 25% tariff on imports from Canada and Mexico would be imposed on March 4 instead of April 2. Additionally, he announced an extra 10% duty on Chinese goods. These moves have increased fears of escalating trade tensions.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that stock markets react negatively to uncertainty. Ever since Trump was elected, there has been a rise in market instability. His recent tariff announcements confirm that he may use aggressive trade policies to push other countries into favorable deals for the U.S. Investors are now waiting to see how China responds. While a full-scale trade war has not yet started, the uncertainty has caused market volatility to rise. The CBOE Volatility Index (VIX) jumped to 21.13, reflecting increased market stress.
Despite the current downturn, Vijayakumar believes that the Indian market may recover in March. Favourable economic news and a slowdown in foreign investor selling could support the market. Large-cap stocks are reasonably priced, and long-term investors may see this decline as an opportunity to buy high-quality stocks, especially in the defense sector.
Weak Asian Markets
Asian markets also performed poorly, adding to the pressure on Indian stocks. Hong Kong’s Hang Seng Index dropped 2.3% and was set to break a six-week winning streak. Investors reacted to Trump’s tariff announcement and booked profits on tech stocks. China’s CSI300 Index fell 0.8%, while the Shanghai Composite Index lost 0.9%.
Japan’s stock market was also hit hard. Foreign investors withdrew 1.04 trillion yen ($6.95 billion) from Japanese stocks, marking the largest outflow in five months. The selling was driven by concerns over a strong yen, rising inflation, and Trump’s trade policies.
Nvidia's Impact on the Market
Global tech stocks also suffered due to disappointing earnings guidance from Nvidia. The Nikkei share average in Japan fell to a five-month low of 37,084.44, dragged down by semiconductor-related stocks.
Nvidia’s stock dropped 8.5% after the company’s quarterly forecast revealed lower-than-expected profit margins. Even though Nvidia’s revenue outlook was positive, investors were concerned about declining profitability.
The Hang Seng Index declined 1.3% for the week after six weeks of gains. Many investors took profits after a strong rally in tech stocks. Analysts at UBS suggested that upcoming product launches by Xiaomi and Tencent’s new AI initiatives could lead to further selling.
Ting Lu, Chief China Economist at Nomura, said that Trump’s trade policies have been aggressive towards China. As China continues to advance in high-tech industries like AI and robotics, tensions between the two countries may worsen.
Tech stocks in Hong Kong, which had gained nearly 30% this year, saw a sharp decline of almost 4% in a single day.
U.S. Economic Concerns
The U.S. economy showed signs of slowing down, adding to market fears. The IT index in India dropped 4% after data revealed that U.S. jobless claims rose more than expected last week. This raised concerns about economic slowdown in the world’s largest economy.
With inflation worries rising due to Trump’s tariffs, investors are growing cautious. The IT index has fallen nearly 8% this week, much higher than the 2% decline in the Nifty 50.
Conclusion
The Indian stock market suffered heavy losses due to a combination of global factors, including fears of a trade war, weak Asian markets, disappointing tech sector earnings, and economic concerns in the U.S. While uncertainty remains high, analysts expect the market to stabilize in March. Long-term investors may find this a good opportunity to buy quality stocks at lower prices. However, the market’s direction will largely depend on how global trade tensions evolve in the coming weeks.