Its a difficult Monday for the markets. The Sensex and the Nifty continue the losing streak, down over half a percent each. The Nifty is down to the 23,400 levels while the Sensex slumped nearly 600 points pulled lower metals, energy and oil & gas stocks. The market breadth is favouring declining stocks. Even then broader markets, the BSE Midcap and the BSE Small Cap indices are down around 2% each.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services highlighted that “With the dollar index above 108 and the 10-year US bond yield above 4.4%, FIIs will continue to sell the rally, restricting any potential upside.
It is important to understand that valuations in India continue to be on the higher side, particularly in the broader market. The market needs fundamental triggers like indications on GDP growth and earnings rebound. Until then the market is likely to move only in a range. Investors should stick to fairly valued high quality largecaps.”
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Why are stock markets falling?
Some of the key reasons why the stock markets are under pressure are-
Worries about Trump tariffs
The market, especially the metal stocks are under pressure after Donald Trump announced that his Govt will impose 25% tariff on steel and aluminium imports by US. This tariff is supposed to be in addition to the metal duties that are expected to be announced later this week. Though the US President confirmed that the new tariffs would apply to all countries. he did not announce any specific timeline when it takes effect. Trump also indicated that their would be reciprocal tariffs on nations that impose taxes on US imports later in the week.
Rupee under pressure
The news also had a domino impact on the rupee and it is trading under significant pressure. The currency has now slumped to a lifetime low of 87.94 against the dollar. The Dollar Index has strengthened to 108.32. This is after the currency losed at 87.43/$ on Friday, down nearly 1% for the week, its worst weekly decline since December 2022.Concerns around a global trade war and foreign portfolio outflows continue to weigh on the currency.
Earnings pain continues
The other big worry for the market is the continuing pain on the earnings front. The earnings announced so far, though broadly inline, fail to give any indication of improving sentiment. There are no fundamental triggers that can lift investor sentiment. Additionally, the continued outflow by FIIs and India’s relatively higher valuation also is also denting any significant move up.
All eyes are on the IIP and Inflation data likely later this week for signals of fundamental improvement in economic dynamics.