The domestic equity market opened with significant losses on Monday, February 3, following the downward trend seen in Asian markets, as investors remained cautious amid weak global cues.
The imposition of 25% tariffs on most imports from Canada and Mexico, along with 10% tariffs on goods from China, triggered concerns across global markets, leading to heightened jitters among investors.
Local investors also stayed on edge ahead of the Reserve Bank of India’s upcoming monetary policy announcement later this week.
As of 10:14 AM, the S&P BSE SENSEX was down 653.34 points, or 0.84%, at 76,842.82, while the NSE NIFTY50 was trading at 23,261.75, falling 220.40 points, or 0.94%.
Key factors weighing on the market: Trump’s Trade Tariffs
On Saturday, February 1, US President Donald Trump announced 25% tariffs on most imports from Canada and Mexico, and 10% tariffs on goods from China, set to take effect on February 4, 2025. This announcement sparked volatility in the commodity market.
In response, Canada and Mexico imposed retaliatory tariffs on US goods, while China announced plans to challenge the tariffs at the World Trade Organization and implement countermeasures.
In a bid to soften the impact on energy prices, the US decided to impose a lower, 10% tariff on energy resources from Canada, as reported by CNBC.
Asian Markets React
Asian stocks mostly slumped on Monday as worries about the US’s tariff impositions on key trading partners took hold. Japan’s Nikkei 225 dropped 2.4% to 38,612.96, Australia’s S&P/ASX 200 declined 1.8% to 8,376.30, South Korea’s Kospi fell 2.9% to 2,443.57, and Hong Kong’s Hang Seng lost 1.4%, settling at 19,942.54. The Shanghai Composite also saw a dip, though it remained relatively stable at 3,250.60.
Union Budget’s Impact on Investor Sentiment
Finance Minister Nirmala Sitharaman’s Union Budget tabled on Saturday, February 1, included a marginal increase in capital expenditure allocation, continuing the government’s focus on infrastructure-driven growth. However, this move made investors somewhat cautious during Monday’s market opening.
For FY 2026, the government allocated ₹11.21 lakh crore for capital expenditure, marking a 0.9% increase from the previous fiscal year. Although several sectors saw an increase in funding, the railway sector’s allocation remained unchanged, which led to declines in shares of state-run railway firms. Indian Railway Finance Corporation (IRFC), Rail Vikas Nigam Ltd (RVNL), and RailTel Corporation saw drops of up to 5%.
Rupee Hits Record Low
The Indian rupee plunged 67 paise to a record low of 87.29 against the US dollar, following the announcement of Trump’s tariffs. The rupee opened at 87.00 and slipped further to 87.29 in early trade, reflecting growing concerns over a potential global trade war.
Meanwhile, the US dollar index, which measures the greenback’s strength against a basket of six currencies, rose by 1.3% to 109.77. Other major currencies, including the Euro, GBP, and Yen, also saw declines, with the Euro dropping to 1.0224, the GBP falling to 1.2261, and the Yen weakening to 155.54. Among Asian currencies, the Yuan sank to 7.3551, the Indonesian Rupiah to 16,448, and the Korean Won to 1,470.