Despite the overall decline, midcap and smallcap stocks showed resilience, with indices rising by 0.5% and 0.8%
On Thursday, February 20, 2025, Indian stock market opened lower, influenced by mixed global cues and investor concerns over potential U.S. tariffs. At the time of writing, the BSE Sensex had declined by 197.87 points (0.26%) to 75,738.34, while the Nifty 50 was down 33.60 points (0.15%) at 22,891.74.
Market Influencers
The downturn in Indian benchmarks is partly attributed to significant losses in heavyweight stocks such as HDFC Bank and Maruti Suzuki India. HDFC Bank experienced a 2.1% drop due to discounted trades in multiple blocks, and Maruti Suzuki India fell by 2% following its parent company’s decision to reduce electric vehicle launches in India.
Additionally, global trade tensions have escalated after U.S. President Donald Trump announced plans to introduce a 25% tariff on imports of automobiles, pharmaceuticals, and semiconductor chips. This announcement has heightened uncertainty in global markets, affecting investor sentiment in India.
Sectoral Performance
Despite the overall decline, midcap and smallcap stocks showed resilience, with indices rising by 0.5% and 0.8%, respectively. However, the financial sector faced pressure, with the Nifty Financial Services index declining by 0.8%, primarily due to the downturn in HDFC Bank shares.
Cigarette manufacturers also experienced losses amid reports of a potential tax hike. Shares of ITC fell by 1.2%, while VST Industries and Godfrey Phillips saw declines of 4% each.
Foreign Investor Activity
Foreign investors have been net sellers in the Indian equity market, withdrawing approximately $12.31 billion so far in 2025. This trend is influenced by concerns over potential U.S. interest rate hikes, which could make emerging markets like India less attractive.
Primary Market Activity
The Indian primary market witnessed robust activity in 2024, with 331 new offerings raising a total of ₹1.68 trillion. However, 2025 has seen a slowdown, with nine mainline companies raising an estimated ₹15,108 crore. Subscription levels for these IPOs have been modest, often in single digits, due to volatility in the secondary markets.
Despite the current slowdown, the IPO pipeline remains strong. Data from PrimeDatabase indicates that 44 companies have received approval from the Securities and Exchange Board of India (SEBI) to raise approximately ₹66,095 crore, with an additional 67 companies awaiting approval to raise around ₹1.17 trillion. Market analysts, however, remain divided on the outlook for the primary markets in the coming months, given the ongoing volatility.
Global Context
Asian markets have also been affected by the uncertainty surrounding U.S. tariff policies. The minutes from the U.S. Federal Reserve’s January policy meeting revealed concerns about the inflationary impact of the proposed tariffs, suggesting potential interest rate hikes. This development has added to the cautious sentiment among investors globally.
The Indian stock market is currently navigating a complex landscape marked by global trade tensions, sector-specific challenges, and cautious investor sentiment. While certain sectors and midcap stocks exhibit resilience, the broader market faces headwinds from both domestic and international factors. Investors are advised to stay informed and exercise caution, considering the potential impacts of global economic policies and domestic market dynamics on their investment decisions.
