- Indian equity markets set to open flat with bearish sentiment.
- US tariff threats on Canada fuel worries over global economic slowdown.
- Foreign portfolio investors continue massive sell-offs, pulling over $16 billion in 2025.
- Inflation data expected to show easing, but market sentiment remains weak.
- Global volatility triggers declines in Indian blue-chip and midcap stocks.
India’s equity benchmarks are likely to open on a flat to negative note on Wednesday, as investors remain cautious amid growing fears of economic slowdown triggered by US President Donald Trump’s recent tariff threats.
The GIFT Nifty futures were trading at 22,555 as of 8:11 a.m. IST, suggesting a marginal drop compared to Tuesday’s close of 22,497.90.
The announcement of plans to double tariffs on Canadian steel and aluminum immediately rattled global financial markets, adding more uncertainty to the already fragile global economy.
While Trump quickly reversed the decision, the initial market reaction left investors unsettled, contributing to negative sentiment.
Escalating Trade Wars
The latest tariff announcement reignites concerns over the growing trade wars between the US and other global powers. Trump’s inability to predict whether the US is headed for a recession further exacerbates fears of an economic downturn, dampening investor sentiment worldwide.
This uncertainty overshadowed earlier optimism related to Ukraine’s readiness for a ceasefire, resulting in mixed market movements across Asia. While some Asian markets saw modest gains, Wall Street equities closed lower, adding to the overall pessimism in global markets.
India’s Stock Market Struggles
India’s blue-chip stocks have faced challenges lately, with major indexes dropping about 15% from their all-time highs in September 2024. Meanwhile, midcap and smallcap indexes have fared even worse, falling over 20% from their peaks. This trend clearly reflects a lack of investor confidence.
Moreover, the outflow of foreign capital continues to weigh on the Indian markets. Foreign Portfolio Investors (FPIs) have sold more than $16 billion in Indian stocks so far in 2025. Just on Tuesday, FPIs sold 28.24 billion rupees ($323.8 million) in shares, according to provisional data.
At the same time, investors eagerly await inflation data from both India and the US, set to be released today. India’s inflation is expected to dip below 4% for the first time in six months, mainly due to moderating food prices. However, this relief probably won’t shift the market’s overall bearish sentiment.
Furthermore, the fear of further rate hikes in both countries, driven by inflationary pressures, adds to the uncertainty. As a result, many investors remain cautious about their market exposure and continue to hold back from making significant moves.
Stocks Under Pressure
Several high-profile Indian stocks are facing significant pressure:
- Starlink and Bharti Airtel: While the deal between Elon Musk’s Starlink and Bharti Airtel to bring internet services to India was seen as a positive move, market reaction has been tepid, failing to lift overall market sentiment.
- Tata Consultancy Services (TCS): TCS’s acquisition of Darshita Southern India Happy Homes for 22.5 billion rupees has not provided the expected boost to the stock, which remains underperforming amid broader market weaknesses.
- Infosys: Infosys saw a significant decline in its US-listed shares, falling by 2.42% after Morgan Stanley downgraded the stock from “overweight” to “equal-weight,” citing concerns about slowing growth and an uncertain global outlook.
- IndusInd Bank: IndusInd Bank is facing a steep 27% drop in stock value after discrepancies were discovered in derivatives accounting. The National Stock Exchange (NSE) has intervened, banning futures and options on the stock to curb excessive speculation, but investor confidence remains shaken.
With mounting concerns over global tariffs, economic slowdown, and persistent foreign capital outflows, India’s stock market faces a difficult road ahead. The negative sentiment is likely to persist as investors remain cautious, awaiting inflation data to provide some clarity.
In the short term, the outlook remains bearish for India’s equity markets, with little indication of a significant turnaround in the near future.