Major Stock Market Indices Plummet On Wall Street: Will Sensex, Nifty Bear The Brunt?

Wall Street witnessed a sharp sell-off as major stock indices suffered steep declines. The S&P 500 slumped by 2.2%, the Dow Jones fell by over 500 points, and the Nasdaq plunged 3.6%, marking one of its most significant drops in recent weeks.

Large technology stocks, which have been the driving force behind Wall Street's rally, came under heavy selling pressure. Microsoft, Nvidia, Tesla, Meta, and Alphabet all tumbled between 4% and 11%, erasing billions in market capitalisation.

Photo Credit: PTI

Investor confidence has been dented as concerns over a potential US economic slowdown intensify.

Worries about inflation, interest rate hikes, and geopolitical tensions had already been weighing on the markets, but fresh uncertainty surrounding President Donald Trump's proposed reciprocal tariffs has exacerbated the sell-off.

Market analysts suggest that the increasing risk of trade disputes is unsettling investors, raising fears about corporate earnings and global economic growth.

Will Dalal Street Be Affected?

Could this turmoil spill over to Dalal Street when the Sensex and Nifty resume trading on Tuesday? One thing is certain: the panic is not limited to Wall Street. European markets have already felt the impact, and Asian markets are unlikely to be spared. Dalal Street is expected to witness volatility, particularly in information technology (IT) stocks that depend heavily on US business.

With foreign institutional investors (FIIs) playing a crucial role in Indian markets, all attention will be on their next course of action. If they continue to withdraw significant funds, heightened volatility can be anticipated in the coming sessions.

Following today's weak market close, Satish Chandra Aluri of Lemonn Markets Desk remarked, "Markets gave up morning gains as weak global cues led by tariff uncertainty weighed on sentiment. With US President Trump firm on imposing reciprocal tariffs from April, despite near-term risks, volatility is likely to remain elevated. European markets opened lower, and US futures took a hit, dragging our indices into the red in the second half."

Monday's trading session on Dalal Street began on a positive note but ended on a weak footing.

The Nifty 50 declined by 0.41% to close at 22,460.30, while the Sensex also slipped into negative territory. Midcap and smallcap stocks bore the brunt of the downturn, falling between 1.8% and 2.4%.

Ajit Mishra, SVP, Research at Religare Broking Ltd., noted, "Markets began the week on a feeble note, shedding nearly half a percent amid mixed cues. The Nifty faced resistance at its 20-day EMA, which not only capped the upside but triggered profit booking. For any sustainable rebound, a fresh catalyst is needed, but with the banking index underperforming, hurdles remain."

From a technical standpoint, the outlook appears challenging. Nifty's inability to sustain above 22,700 and its close below 22,500 suggest a possible decline towards 22,250-22,370. Bank Nifty also came under pressure, with immediate support at 48,000.

Vinod Nair, Head of Research at Geojit Financial Services, commented, "Global headwinds continue to drag market sentiment, with the rise in US unemployment rates and tariff concerns adding to uncertainty. While domestic macros favour long-term investors, near-term volatility is expected."

What's Next?

Indian market participants will be closely monitoring inflation data from both India and the US this week, as it could dictate the next market trend.

"A slew of economic indicators this week, including US and India CPI data, will be closely watched for signs of easing volatility. Investors should start accumulating beaten-down stocks but with caution," Nair added.

For now, investors should prepare for a turbulent ride. While long-term investors might view this as a buying opportunity, short-term traders are advised to proceed with caution.