Indian Stock Market Experiences Sharp Decline
Stock Market Crash: The Indian stock markets witnessed a significant downturn on Friday, April 4th. Investor concerns escalated regarding potential tariff proposals and a possible trade war initiated by US President Donald Trump, leading to widespread selling pressure.
The BSE Sensex plummeted 860 points, reaching a low of 75,436, while the NSE Nifty breached the crucial 23,000 mark, closing at 22,921.60. The Nifty experienced a total intraday fall of 329 points. Midcap and smallcap indices also registered declines of 2.3% and 2.7%, respectively.
Main Reasons for Market Decline
1. Anticipation of Tariffs on the Pharma Sector
The possibility of the US imposing tariffs on the pharmaceutical sector was a major contributor to the market's decline. Reports indicated President Trump was considering substantial duties on the pharma industry.
Trump stated, "We are looking at pharmaceuticals as a separate category. An announcement will be made shortly." Following this statement, the Nifty Pharma index dropped by up to 6%, with several pharmaceutical company shares falling as much as 6.25%.
India's pharmaceutical exports to the US account for 10.3% of the total $78 billion. Therefore, the implementation of tariffs could significantly impact India's exports and GDP growth.
2. Decline in Reliance Industries
Shares of Reliance Industries (RIL), a company holding significant index weightage, fell by 4%, reaching a low of ₹1,195.75. With an 11.25% stake in the Sensex, RIL contributed approximately 50% to the overall decline.
The decline was attributed to a sharp drop in crude oil prices. Brent crude fell by 7%, reaching $70, and WTI crude dropped to $66 per barrel. The OPEC+ decision to increase production by 4.11 million barrels per day in May further contributed to the oil price fall. Given that oil and petrochemical businesses constitute 60% of Reliance's total revenue, this decline could pressure the company's earnings.
3. Profit-booking in Large-cap Stocks
Amidst the significant market downturn, selling pressure was observed in several other large-cap stocks. Tata Steel, Tata Motors, L&T, IndusInd Bank, Sun Pharma, Tech Mahindra, Adani Ports, HCL Tech, Infosys, TCS, Maruti Suzuki, NTPC, Asian Paints, and Titan experienced declines ranging from 1% to 6%.
Tata Steel, Tata Motors, and IT companies were particularly affected, as their earnings are dependent on the US, UK, and European markets. American economic uncertainty exerted pressure on these shares.
Global Markets also Witness Decline
Asian markets experienced a second consecutive day of sharp declines. Trump's tariff proposals and concerns about a US recession prompted investor caution. Japan's Nikkei index fell by 3%, Australia's S&P/ASX 200 index dropped by 2.44%, and South Korea's Kospi declined by 1.78%. Markets in China and Hong Kong were closed due to a holiday.
US markets also witnessed a sharp decline on Thursday. The S&P 500 fell by 4.84%, the Dow Jones by 3.98%, and the Nasdaq by 5.97%. US market futures also showed downward pressure on Friday, with Dow Jones futures down 0.31%, S&P 500 futures down 0.29%, and Nasdaq 100 futures down 0.28%.
