Panic On Dalal Street — Here's What Spooked Nifty, Sensex Into Tumbling On Tuesday

Indian benchmark indices extended the fall on Tuesday to tumble over 1%, as global uncertainties continued to keep global funds away from domestic equities.

Indian benchmark indices — NSE Nifty 50 and 30-stock Sensex — fell as much as 1.54% and 1.5%, respectively, in Tuesday's trade. Nifty Realty, Media and Energy fell the most.

The broader market tumbled over more than the benchmark indices, with the midcap index down 3.44% and the small-cap index slipping by 3.84%.

About 75 of 150 midcap companies' shares have fallen over 20% from their highs, while 121 of 250 smallcaps have fallen over 20% from their highs, according to data compiled by NDTV Profit.

Despite the positive developments from the union budget and RBI rate cut, Indian stocks remained cautious, with NSE Nifty 50 and BSE Sensex down nearly 2% since the budget.

Foreign portfolio investors stayed net sellers of Indian equities for the fourth straight day on Monday, as they offloaded stocks worth approximately Rs 2,463.72 crore.

So far in the year, FPIs have sold equities worth Rs 85,841 crore. In January, the FPIs sold equities worth Rs 78,027 crore, according to the National Securities Depository Ltd.'s data. While in February, the FPIs have sold Rs 7,814 crore so far.

Foreign outflows are already at levels seen in previous intervals of FII selling, but the 2021-2022 period shows they have room to sell more, HSBC said in a report.

US President Donald Trump unveiled plans to impose 25% tariff on all imports of steel and aluminum. He said the tariffs would apply to import of the metals from all countries.

This comes after a series of threats against Mexico, Canada and China. While tariffs on Mexico and Canada are on hold, China’s retaliatory tariffs on US goods have taken effect.

Since November last year, the dollar index — which tracks the greenback's performance against a basket of 10 leading global currencies — has risen nearly 5%.

The worst of earnings downgrade cycle is also not over yet, Bernstein Research said in a note. Analyst estimates are already near record bearish levels for staples, energy and materials, suggesting a tactical contrarian positive view. "All other sectors are not showing any signs of bottom yet in the downgrades."

Bernstein is still cautious on consumer discretionary stocks after the Rs 1 lakh crore tax sops given in the budget. All three styles — momentum, high volume and growth — are likely to remain under pressure driven by record high valuations and increased pace of earnings cut, it said.

Valuations have become more reasonable with the brokerage pricing in 50 basis points rate cuts versus 90 basis points at the beginning of the year.

However, markets need to further re-price a less aggressive rate cut cycle, and rising equity risk premium still remains a key headwind in the near-term, Bernstein said.

The Rupee became the worst currency in Asia in 2025 from the most stable one in previous years. In his recent policy speech, RBI governor Sanjay Malhotra said interventions in the forex market would focus on smoothening excessive and disruptive volatility, and not targeting any level of the rupee.

Reserve Bank of India has been intervening heavily in the market since Monday, traders familiar with the development told NDTV Profit as speculation grew that the rupee might touch 90 against the US dollar.

The domestic currency sustained its gains from the open, peeling away from the 87-mark as the day progressed.

The uncertainty around tariffs and their potential impact on the global macro scenario remains a key concern for all EMs, including India. Analysts see India and Thailand among the emerging economies to face risks of higher reciprocal tariff, as they have higher relative tariff rates even compared to developed countries.