Stock Market Crash: Key Factors Behind 'Black Monday' As Nifty Tumbles 5%

The Indian stock markets extended its decline for the third day on Monday after US President Donald Trump's announcement on tariffs. The markets fell nearly 5%, dragged by information metal, information technology and auto shares.

Nifty 50 fell as much as 5.07% to 21,743.65 and Sensex was down 3,939.68 points to 71,425.01. This comes after the Asian markets plunged most in 14 years on Monday following the Wall Street's decline.

The Nifty index posted its worst open since March 2020.

Towards the end, the Nifty closed 742.85 points or 3.24% lower at 22,161.60, while the Sensex shed 2,226.79 points or 2.95% to 73,137.90.

Volatility index VIX had risen over 50.20% in the early hours of trading.

Global Mayhem

Global financial markets extended its selloff on Monday extending its decline for the third day since US President Donald Trump's announcement on tariffs. Asian shares fell to their lowest levels in 14 years on Monday.

The decline was led by Chinese shares amid fears over the trade war's impact on the global economy.

While Japanese shares fell 6.5% while China's CSI 300 index fell 5.2% and Hong Kong's Hang Seng index fell 9.1%. In South Korea also held on to their losses with Kospi index falling over 4%.

In Australia, the S&P/ASX 200 fell 3.7%, while Taiwan's taiex fell 9.7%.

The S&P 500 saw its worst two-day plunge since March 2020 in a sellof that slashed over $5 trillion in value, with the gauge down 6% on Friday. The Nasdaq 100 entered a bear market.

US stock futures also indicate continued selling pressure, as worries over a looming recession in the world's largest economy deepened.

Cooling Oil

Oil extended its sharp drop after Saudi Arabia slashed its flagship crude price by the most in more than two years and the escalating trade war spurred concerns about a global recession and weaker energy demand. This comes days after OPEC+ announced a surprisingly larger output hike.

Brent fell by almost 4% to $63.01 a barrel, a four-year low, before paring losses, while West Texas Intermediate was near $60.

WTI for the May delivery was down 2.6% to $60.40 per barrel.

Trump Tariffs

While speaking at the Rose Garden on 'Liberation Day' on Wednesday, Trump announced a 10% baseline tariff on all countries with the new tariff policy taking effect starting midnight EST, with effect from April 5. The US imposed sweeping tariffs on multiple trade partners, with rates as high as 49% on Cambodia, 36% on Thailand, and 34% on China.

US also announced a 26% tariff on Indian imports, citing the country's higher tariff rates on American goods. The European Union faces a 20% tariff.

Even allies like Israel (17%) and the UK (10%) aren't exempt. Switzerland faces a 31% tariff, and Vietnam has been marked for a 46% levy. The higher-than-baseline tariffs will take effect from April 9.

In addition, Trump also said that there would be tariff on the pharma sector that pushed the pharma index lower on Friday.

In retaliation to the tariffs by US China announced a 34% retaliatory tariff, along with measures like halting imports of poultry products from two American companies, adding 11 American defence companies to an unreliable entity list, imposing export controls on 16 US firms and more.

FIIs Stay Sellers

The foreign institutional investors stayed net sellers on Friday for the fifth straight day. Overseas investors offloaded equities worth Rs 3,484 crore, while domestic institutional investors turned net sellers after five buying sessions as they offloaded equities worth Rs 1,720.32 crore.

In April so far, FPIs have offloaded equities worth Rs 10,355 crore — higher than the net selling of Rs 3,973 crore recorded in March, according to NSDL data. This follows net equity outflows of Rs 34,574 crore in February and Rs 78,027 crore in January.