The benchmark indices fell over 1% after posting a subdued start on Thursday. Nifty fell below 25,000 while Sensex was down nearly 1,000 points. The broader segment of the market was also negative as the Nifty Midcap 150 was down 1.20% and Smallcap indices was down 1.09%.
"Investor sentiment remains cautious due to slow progress in US-China trade talks, President Donald Trump said he will set unilateral tariff rates within two weeks, a 0.5% decline in U.S. index futures, and rising geopolitical tensions in the Gulf region,” said Vikas Jain, head of research at Reliance Securities.
The markets were dragged by Nifty Realty and Nifty Energy.
The rising tensions in Middle East also impacted the markets. US President Donald Trump's amid tensions in Middle East has US has ordered some of its staff to depart form the embassy in Baghdad after Iran threatened to attack US bases if talks over its nuclear program fall through.
"The downturn was attributed to intensified profit-booking and risk-off sentiment, as escalating geopolitical tensions in the Middle East overshadowed positive macro cues such as softening inflation and encouraging trade data. Investor mood remained cautious ahead of further developments on the US-China trade front, adding to market uncertainty," said Bajaj Broking Research.
The Nifty and Sensex opened on a muted note and traded in a narrow range for most of the session. However, in the last leg of the trade, the Nifty slumped 1.25% or 315.50 points to the day's low of 24,825.9, and the Sensex declined 1.20% or 991.98 points to 81,523.16.
The NSE Nifty 50 ended 253.2 points or 1.01% down at 24,888.2, and the BSE Sensex closed 823.16 points or 1% lower at 81,691.98.
Volatility index VIX rose over 4% on Thursday.
Global Cues
US Dow Jones futures were down 127 points, signaling a weak start for Wall Street. European markets were also trading lower on Thursday after the UK economy shrinks more than expected.
Asian stocks traded mixed as investors reacted to President Trump's statement that a trade agreement with China was done, pending final approval from both himself and Chinese President Xi Jinping.
Trump also indicated that the deal would include a 55% tariff on Chinese imports, a figure later confirmed by Commerce Secretary Howard Lutnick, who stated that tariffs would remain at that level.
Additionally, Trump said he will set unilateral tariff rates within two weeks, dialing up trade tensions once again. The latest tariff threat came a day after Chinese and US officials struck a positive tone following their talks to dial down tensions.
The S&P 500 fell 0.3%, while the NASDAQ Composite fell 0.5% on Wednesday. The Dow Jones Industrial Average closed flat at 42,865.77 points.
Oil
On Thursday, crude extended gains with Brent crude – the global benchmark for crude oil – rising 0.24% to $70.01 on spiking tensions in the Middle East. This comes after crude rose over 5% on Wednesday.
However, the Brent crude had slipped below $59 in May, the lowest level since February 2021. In the last two months crude prices have tumbled to a four-year low amid US President Donald Trump's tariff wars.
CPI Data
Investors also awaited CPI data. India's retail inflation is likely to continue to dip further in May after easing to the lowest in nearly six years in April.
The Consumer Price Index-based inflation is projected to ease to 2.98% in May, according to a median forecast of economists polled by Bloomberg. This is after it came in at 3.16% in April—the lowest since July 2019, and below the central bank's target of 4%.
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