As the Indian stock markets tumble under the panic set off by US President Donald Trump's tariff tantrums, three market experts weigh in on the reasons behind this fall, how much pain is left and how should investors adapt their strategies to invest in markets.
A day after US President Donald Trump unveiled his tariff imposition plan beginning March 4 on Mexico, Canada and China, the Indian stock markets are experiencing a bloodbath, with both the BSE Sensex and NSE Nifty 50 dragged down.
Interestingly, this marks the fifth consecutive month of declines, a streak not seen since 1996 coming as it does on the back of foreign institutional investors selling almost $25 billion worth of Indian equities.
Friday's sharp downturn is led by corrections in the IT (down 4%), Auto (down 3.7%), PSU Banks (down 3.2%) and Consumption (down 3%).
The tech and financial sectors bore the brunt of the downturn, with significant losses reported across mid and small-cap stocks, both down by more than 2.5%.
Market experts Anil Rego, Ambareesh Baliga, and Deepak Jasani attribute the crash to a confluence of factors, ranging from global uncertainties to domestic economic concerns and investor panic.
Global Headwinds and Tariff Fears
"The uncertainty surrounding US policies, particularly Trump's tariffs, is a major contributing factor," states Anil Rego, MD and CIO of Right Horizons PMS. "Every day, there's fresh news, with the latest being tensions involving China, Canada, and Mexico."
Ambareesh Baliga, an independent market analyst, echoes this sentiment, highlighting the impact of these global events on market sentiment. "Tariff issues are playing a significant role. The way our rupee has been moving also indicates a lack of support from any news flow," he observes.
Deepak Jasani, another independent market analyst, adds, "Trump tantrums are adding to it, the nervousness gets accentuated because of such utterances." He emphasises the psychological impact of these global events, contributing to a sense of unease among investors and spoiling the investor-sentiment.
Domestic Economic Concerns and Investor Panic
Beyond global factors, domestic economic concerns are also weighing heavily on the market. "There was a bit of an economic slowdown, and investors were spooked," Rego explains. He also points to the phenomenon of "investors getting stuck" and needing to exit due to financial obligations or fear-driven decisions. "There's a lot of negative news flow, so the feeling is that it will go down further," he notes.
Baliga highlights the impact of specific events like the MSCI index changes, affecting stocks like Zomato and Jio, as triggers for the initial sell-off. "One is the changes made by MSCI," he states.
Jasani attributes today's sharp fall to the "continuation" of existing trends and technical levels being breached. "Today it is just a continuation (of the sell-off we are seeing since October 2024). Basically, there is no fresh negative news. So with technical levels being breached on the downside, now everybody is pressing the sell button, whether it is institutional or non-institutional investors."
Where is the Bottom? And What Could Trigger a Recovery?
Predicting the market's bottom is proving challenging. "Difficult to say, but I think the market looks very oversold," Rego points out. He points to the potential for an earnings recovery, with initial signs visible in rising GST numbers, as a key indicator. "The continued watching of the GST numbers will be the first trigger for us," he asserts.
Baliga believes the market is nearing its bottom, suggesting a range of 22,000 to 21,000 on the Nifty. "We've reached that level now, but the selling is still continuing. We can go down another thousand points more from here," he cautions. However, he also emphasises that "valuations are now in favour" and that "at these levels, you should not be sitting quiet."
Jasani believes a bounce is "overdue," but it will require a "big positive development." He cites potential triggers like Trump retracting tariff threats or a de-escalation of geopolitical tensions. "It can happen in time. But we will need some big positive development. So I don't know when that will happen. Like Trump taking back his tariff threats because come March 4 he has announced a big tariff on Canada, China and Mexico. The stopping of hostilities between Ukraine and Russia could be another balm to cool the geopolitical tensions."
Advice for Retail Investors: Don't Panic, Stay Invested
All three experts advise retail investors to remain calm and avoid panic selling. "At first, don't panic," Rego emphasises. "There's no point in doing anything now. Ideally, you should have moved out earlier." He also advises against stopping SIPs (Systematic Investment Plans), stating, "The whole point of you doing SIPs is because you want to buy when markets fall and this is that opportunity."
Baliga advises investors to start investing gradually. "I've been suggesting my investors to start keep investing now. Even if the market falls further, keep investing. You need to keep in mind that the markets can fall further from here, so don't have any regrets." He suggests starting with 25% of the planned investment.
Rego outlines a long-term perspective. "It's important to look at equities from a slightly longer-term perspective, at least three to five years," he advises.
For retail investors, this is a time to stay calm, avoid panic selling, and focus on long-term wealth creation. As Anil Rego puts it, "Equities are a long-term game. If you're investing with a horizon of five to ten years, these corrections are just bumps in the road."
Sectors to Watch: Private Banks, Consumption, and Manufacturing
Regarding sectors to watch, Rego sees value in private sector banks, the consumption sector, and select manufacturing areas. "Private sector banks are looking interesting. We continue to like the consumption side, and some manufacturing areas could be places to be," he suggests.
Baliga suggests, "At these levels, you should not be sitting quiet. You should start buying." He notes that valuations have come to decent levels, making it a good time to begin accumulating quality stocks.
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