India's stock benchmarks, the Sensex and Nifty, experienced significant declines on February 28, 2025, with the Sensex falling nearly 1,000 points and the Nifty nearing 22,300, driven largely by external economic pressures.
During the initial trading session, the Sensex was recorded down by 1,009.64 points, or 1.35 percent, settling at 73,602.79, and the Nifty plummeted by 316.25 points, marking a 1.4 percent drop at 22,228.80. This led to the erasure of about Rs 6 lakh crore ($72 billion) from the market's capitalization, showcasing the dramatic shift in investor confidence.
The decline stemmed from uncertainty surrounding U.S. President Donald Trump’s recent tariff announcements, which sparked fears of economic repercussions. On February 27, Trump disclosed plans for 25 percent tariffs on Mexican and Canadian goods, effective March 4, alongside additional tariffs on Chinese imports aimed at combating the influx of narcotics. These decisions, coupled with previously imposed tariffs, create trepidation among investors as they navigate the volatile market.
According to Prashanth Tapse, Senior VP (Research) at Mehta Equities, the mixed quarterly results from Nvidia added to the woes of already jittery investors, stating, "Trump's announcement of a 25 percent tariff on EU imports and Nvidia's mixed quarterly results are key negative catalysts weighing on investor sentiment."
Global market conditions also exacerbated worries. The sharp downturn across major U.S. indices on February 27, following disappointing economic data and underperformance by significant technology stocks, created ripples across Asian markets, including India. These factors contributed to an intensified wave of profit-taking and foreign institutional selling.
Reportedly, foreign investors have offloaded Indian equities worth approximately Rs 47,349 crore within February alone, mirroring the net selloff of Rs 78,027 crore experienced during January. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, noted, "There is no respite for foreign outflows, which is adding pressure on the markets at this point." He emphasized the negative global cues, saying, "Right now, investors worldwide are grappling with uncertainty surrounding Trump’s tariff policies and the general lack of direction in the market, prompting many to prefer cash positions."
Specific sectors reflected the broader market decline, with IT, financial, and automotive sectors drawing sharp losses. All major sectoral indices were portrayed in red, with IT stocks collapsing by over 3 percent as all ten major companies within the Nifty IT index faced declines of 1 to 4 percent. Among the top underperformers were Infosys, Wipro, and IndusInd Bank, with drops ranging broadly within the lower single digits.
On the contrary, select stocks like Grasim, Reliance Industries, and Shriram Finance provided moments of respite as they recorded modest gains, but the overall sentiment remained pessimistic. The Nifty Smallcap 250 and Nifty Midcap 150 also demonstrated greater weakness, dropping over 2 percent and nearing nine-month lows, reflective of the compounded challenges facing smaller enterprises.
Christopher Wood, the global head of equity strategy at Jefferies, has pointed out the need for valuations of mid-cap stocks to recalibrate and align more with established blue-chip companies to stabilize the market. He remarked, "For the recent market correction to be considered truly over, mid-cap stock valuations need to align more closely with those of blue-chip companies."
The significant adjustments by foreign portfolio investors (FPIs) during February marks one of the heaviest sell-offs witnessed since last year. The selling appears to have stemmed from factors including global tariff uncertainties and geopolitical tensions, challenging the attractiveness of Indian markets relative to other investment opportunities.
Despite these challenges, domestic institutional investors have stepped up, purchasing net shares worth Rs 52,544 crore to cushion some of the blow, illustrating the complex nature of investor behavior amid these turbulent times. The market has started February on the back of consistent declines, with the Nifty benchmark edging toward its fifth consecutive month of losses, the longest losing streak since 1996.
The market's notable decline serves as a stark reminder of the interconnectedness of global economic indicators and local market reactions, proving particularly sensitive to announcements and shifts at the geopolitical level. Investors remain apprehensive, highlighted by the plunging figures and negative market cues, signaling cautious navigation as they look to the wider economic horizon.
Analysts will continue to monitor these trends closely, particularly as repercussions from global tariff discussions evolve. Understanding these dynamics will be key for investors as they prepare for what lies ahead amid varying global conditions.