Sensex & Nifty tumble: 5 key reasons behind the decline

Indian equity benchmarks fell sharply on Monday, with the Sensex and Nifty trading lower amid selling pressure in metal and IT stocks. The weakness overshadowed India’s strong GDP growth figures, as global cues remained mixed and investors turned cautious ahead of key U.S. macroeconomic data.

At around 9:42 am, the BSE Sensex had declined 704 points, or 0.86%, to 80,747, while the Nifty50 was down 168 points, or 0.68%, at 24,585.

The overall market capitalisation of BSE-listed companies dropped by Rs 2.06 lakh crore to Rs 442.13 lakh crore. The Nifty Metal index led the losses with a 1.4% decline, while the Nifty IT index fell 1.25%, weighed down by concerns over the U.S. economy and trade policy. Broader markets also remained under pressure, with small-cap and mid-cap indices slipping 0.3% each.

India's economy had posted a strong 7.4% GDP growth in the January–March quarter, driven by manufacturing and construction. However, that optimism failed to lift sentiment amid external headwinds.

Here are five key reasons behind today’s market decline:
1. U.S. tariffs on metals threaten Indian exporters

Market sentiment turned sour after U.S. President Donald Trump announced plans to double tariffs on imported steel and aluminium to 50%, effective June 4, 2025. This move is expected to adversely affect Indian metal exporters like Tata Steel, JSW Steel, Hindalco, and NALCO, which have significant exposure to the U.S. market.

India exported $4.56 billion worth of iron, steel, and aluminium products to the U.S. in FY2025. The tariff escalation, though not immediately impacting trade, has added uncertainty and is weighing on stocks in the metal sector.

"President Trump’s 50% tariffs on steel and aluminium is a clear message that the tariff and trade scenario will continue to be uncertain and turbulent. This headwind will impact markets," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

2. Weak global cues and trade tension jitters

Asian and European markets showed signs of stress as investors grappled with the implications of escalating U.S.-China trade tensions. Japan’s Nikkei dropped 1.4%, Hong Kong lost 2.5%, and U.S. futures also edged lower — with S&P 500 and Nasdaq futures down up to 0.5%.

Markets are also uncertain about whether the U.S. will follow through with the tariff hike, creating additional volatility. While some regional indices like South Korea’s gained slightly due to political optimism, the overall sentiment remained cautious.

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3. Caution ahead of U.S. Fed commentary and jobs data

Investors are bracing for a heavy week of macroeconomic updates from the U.S., especially the non-farm payrolls report and Federal Reserve commentary, which could influence the path of interest rates.

The U.S. Senate is also set to consider a $3.8 trillion tax-and-spending bill, adding to concerns about the country’s ballooning $36.2 trillion federal debt. As a result, long-term U.S. Treasury yields are nearing the critical 5% mark, which is adding to pressure on global equity markets.

Fed Governor Christopher Waller on Monday indicated that rate cuts are still possible this year, but much will depend on incoming data. For now, markets are pricing in a 75% chance of a rate cut in September, though the Fed has not explicitly confirmed this view.

4. Domestic selloff in key sectors
Back home, selling was broad-based across sectors. Metal and IT stocks, which have global exposure, were among the hardest hit, reflecting external risks. Additionally, 10 of the 13 major sectoral indices on the NSE opened in the red.

Even strong domestic data — with India’s Q4 GDP growth at 7.4% — was not enough to support markets. Investors appear to be locking in gains after recent highs, as global uncertainties loom large over the near-term outlook.

5. Russia-Ukraine conflict
Fresh geopolitical concerns also weighed on investor sentiment after Ukraine launched drone attacks on five airbases deep inside Russian territory, reportedly destroying several aircraft. The incident comes just ahead of a scheduled peace summit in Turkey, raising fears of a possible escalation in the conflict if Russia retaliates.

Any intensification of the Russia-Ukraine war could disrupt global supply chains, especially in energy and commodities, leading to renewed volatility in global markets.

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