In a significant shift in market sentiment, both the NSE Nifty 50 and BSE Sensex ended a two-day losing streak on Tuesday, following the news that the United States had delayed its planned tariff hikes on Canada and Mexico by a month. As of 9:32 a.m. on Tuesday, the Sensex had gained over 443 points, or 0.58%, reaching 77,630.71, while the Nifty rose 130.25 points, or 0.56%, to settle at 23,491.30.
Despite the positive momentum in the stock markets, the Indian Rupee continued its downward slide, hitting an all-time low of 86.98 against the US dollar in early trade, slipping by 13 paise. This new low for the Rupee reflects the ongoing concerns around global trade tensions and the economic impact of tariff measures.
Out of the 12 sectors listed on the NSE, 11 advanced, while one declined. The Nifty FMCG sector, which includes large companies like ITC and Hindustan Unilever, was the worst performer during the market opening, whereas the Nifty Metal sector saw strong gains, driven by global market shifts. Key contributors to the Nifty 50’s performance included Infosys, ICICI Bank, Mahindra & Mahindra, and Larsen & Toubro, all of which added to the index’s positive movement. On the other hand, Power Grid Corporation, ITC, Hindustan Unilever, and Asian Paints exerted downward pressure on the Nifty 50.
Market experts noted that the rally was partly fueled by US President Donald Trump’s decision to temporarily freeze tariffs on Canada and Mexico while entering into negotiations. The delay of the tariff hikes, initially planned for implementation on Tuesday, was seen as a positive signal by the markets, signaling a potential de-escalation in the trade conflict. Donald Trump had previously threatened to impose a 25% tariff on imports from Canada and Mexico, and a 10% tariff on Chinese imports, as part of efforts to address migration and fentanyl smuggling into the United States.
Vikram Kasat, Head of Advisory at PL Capital-Prabhudas Lilladher, explained that over the weekend, Donald Trump had followed through on earlier threats to impose tariffs, which had been cited as necessary measures to curb illegal migration and the flow of drugs into the U.S. These tariff plans had prompted global market sell-offs in recent days. The Indian Rupee hit a historic low of over Rs 87 per US dollar for the first time on Monday, reflecting the market’s response to the growing trade tensions and the potential for further economic disruption.
The US tariffs on imports from Canada and Mexico were scheduled to take effect on Tuesday, with a 25% tariff planned for both countries due to concerns over the flow of undocumented migrants and drugs across their borders. In contrast, a 10% tariff increase had been planned for China, but no negotiations were held ahead of the tariff hike.
Amid these developments, Foreign Institutional Investors (FIIs) continued to be net sellers in the Indian equity market, offloading equities worth Rs 3,958 crore on February 3, marking their 23rd consecutive session of selling. Domestic Institutional Investors (DIIs), however, remained active buyers, purchasing equities worth Rs 2,708 crore on the same day.
In terms of market volatility, the India VIX, which measures the volatility of Indian stocks, saw an increase of 1.83%, settling at 14.3525. This suggests that while the stock markets saw some positive movement, investor sentiment remains cautious, with ongoing concerns over global trade tensions and their impact on the Indian economy.
As the markets react to the shifting dynamics of global trade, the coming weeks are likely to see heightened attention on the US-Canada-Mexico negotiations and the evolving stance of the US administration on tariffs. Meanwhile, the Indian Rupee’s struggle to strengthen against the US dollar remains a key factor influencing market conditions, with investors closely monitoring developments in both global and domestic markets. The overall outlook for the Indian markets will depend on the resolution of these ongoing trade disputes and the potential for further fiscal adjustments from key global players.
