Markets opened lower as Sensex fell 450 points and Nifty dropped 168 points, with all sectors trading in the red
The Indian stock market opened lower on Monday, February 3, 2025, reflecting weak global cues and investor caution following the Union Budget announcements. Benchmark indices BSE Sensex and Nifty50 experienced sharp declines as market participants reacted to global trade tensions and concerns over upcoming policy decisions.
At the time of writing, the BSE Sensex was down by 450.12 points, or 0.58%, trading at 77,055.84, while the Nifty50 fell by 168 points, or 0.72%, standing at 23,314.14.
Sectoral Performance: Widespread Losses Across Key Industries
All sectoral indices were trading in the red, signaling broad-based weakness in the market. The Nifty Metal Index recorded the sharpest decline, dropping 3.19%, reflecting concerns over global trade disruptions and commodity price fluctuations. The Realty Index followed closely, falling 2.07%, as investor sentiment weakened amid uncertainty over monetary policy.
The IT sector, represented by Nifty IT, declined 1.44%, impacted by volatility in global tech stocks. The Banking Index also faced pressure, losing 1.04%, as expectations of a policy rate cut later in the week influenced market sentiment. Other notable sectoral losses included Pharma (-1.10%), Healthcare (-1.01%), Oil & Gas (-1.79%), and Financial Services (-0.91%).
In the broader markets, BSE MidCap and BSE SmallCap indices saw declines of 1.49% and 1.53%, respectively, as investors reduced exposure to riskier stocks. Additionally, India VIX, the market’s volatility index, surged 5.07% to 14.81, signaling heightened uncertainty.
Impact of Union Budget 2025 on Market Sentiment
The Union Budget 2025, presented on February 1 by Finance Minister Nirmala Sitharaman, introduced a mix of tax cuts and fiscal discipline measures aimed at strengthening the economy. While the long-term vision of achieving ‘Viksit Bharat’ by 2027 remains intact, short-term market sentiment has remained cautious.
The absence of aggressive capital expenditure (capex) commitments and a conservative fiscal approach dampened expectations of an immediate market rally. Investors are now looking toward monetary policy decisions by the Reserve Bank of India (RBI) to provide further direction on economic growth and liquidity.
RBI Policy Decision and Foreign Institutional Flows
The Monetary Policy Committee (MPC) of the RBI is set to announce its policy rate decision later this week, with widespread expectations of a 25-basis-point rate cut. If implemented, this would mark the first rate cut in almost five years, providing relief to borrowing costs and potentially boosting consumption-driven sectors.
Foreign Institutional Investors (FIIs) have continued to reduce exposure to Indian equities, citing global economic concerns and the shifting trade landscape. Persistent selling by FPIs (Foreign Portfolio Investors) has added to market pressure, leading to continued volatility in key indices.
Global Trade War Escalation and Its Effect on Markets
The market downturn in India is not occurring in isolation. Over the weekend, U.S. President Donald Trump announced a new round of trade tariffs, imposing a 25% duty on imports from Canada and Mexico and a 10% levy on goods from China. These tariffs are set to take effect from Tuesday, February 4 and have already triggered concerns over supply chain disruptions.
The Indian government remains in a wait-and-watch mode, monitoring how these tariffs impact global trade flows. Market analysts warn that increased tariffs could lead to dumping of goods into India, posing risks to domestic industries.
Market Reaction to Corporate Earnings and Economic Data
Apart from macroeconomic concerns, investor attention is also focused on corporate earnings for Q3 FY25. Companies such as Power Grid Corporation and Divi’s Laboratories are set to report results, with analysts closely monitoring profit margins and growth forecasts.
Additionally, Final January Manufacturing PMI data from India, China, the U.S., and the U.K. is on the radar. These indicators will provide insights into manufacturing sector health and global economic activity, which in turn may impact investor confidence.
Muted Market Response to Budget Tax Cuts
Despite tax breaks announced in the budget, aimed at boosting consumption, the stock market has not shown significant positive momentum. Analysts suggest that while tax relief may support consumer spending, it is not enough to drive market optimism in the absence of stronger government investments in infrastructure and capex-heavy projects.
The FMCG sector, automobile stocks, and domestic tourism could benefit from higher disposable income, but a broader market rally would likely require stronger corporate investment sentiment and clarity on trade risks.
IPO Activity and Investor Interest
In the primary market, the basis of allotment for Dr. Agarwal’s Health Care IPO and Malpani Pipes And Fittings IPO is set to be finalized today. While IPO activity remains robust, investor participation may be influenced by overall market conditions and foreign investment trends.
Market participants are also awaiting upcoming high-profile IPOs to gauge whether investor appetite remains strong despite the current market correction.
Asian Markets and U.S. Stock Futures Reaction
Stock markets across the Asia-Pacific region reflected similar bearish sentiment on Monday following the U.S. trade tariffs announcement.
- Australia’s S&P/ASX 200 declined 1.7%.
- Japan’s Nikkei 225 fell 1.99%, with the Topix index losing 1.85%.
- South Korea’s Kospi dropped 2.43%, while the small-cap Kosdaq traded 2.64% lower.
- Hong Kong’s Hang Seng Index was down 0.52%.
- Stock futures in the U.S. also tumbled in response to the new tariffs.
- Dow Jones Industrial Average futures dropped 463 points, or 1%.
- S&P 500 futures fell 1.6%.
- Nasdaq-100 futures lost 2.1%.
The weakness in global markets suggests that investors are reducing risk exposure as geopolitical tensions and trade policy changes create uncertainty.
Outlook for the Market in the Coming Days
The stock market is expected to remain volatile as investors navigate global trade uncertainties, domestic economic policies, and earnings reports.
Key factors that could influence market movement in the coming days include:
- RBI’s policy decision and any potential rate cut announcement.
- Continued foreign institutional investor flows, which have been impacting liquidity.
- U.S. trade developments, especially regarding China, Mexico, and Canada.
- Corporate earnings performance, particularly in banking, pharma, and IT.
- Crude oil price fluctuations, which could impact India’s fiscal outlook.
While long-term fundamentals remain strong, short-term caution prevails, with market participants closely monitoring both domestic and international economic trends.
Final Thoughts
The Indian stock market started the week on a weaker note, with Sensex and Nifty declining, reflecting global economic uncertainty and investor caution post-budget. Trade tensions between the U.S. and major economies, combined with RBI’s upcoming rate decision, are shaping market sentiment.
While tax cuts and fiscal measures announced in the Union Budget 2025 are expected to support long-term economic growth, immediate market reaction remains subdued. Investors are adopting a wait-and-watch approach, keeping an eye on global developments, earnings reports, and policy shifts before making significant investment moves.
