Market chaos ensues as Trump’s tariffs on Canada, Mexico, and China spark panic — rupee nosedives, Sensex and Nifty tumble.
BY PC Bureau
The Indian rupee depreciated by 67 paise to hit a record low of 87.29 against the US dollar in early trade on Monday, following US President Donald Trump’s imposition of fresh tariffs on imports from Canada, Mexico, and China, sparking fears of a global trade war. Simultaneously, the stock market opened in the red, with the Sensex plunging over 700 points and the Nifty losing nearly 300 points in early trade.
By 10 AM, the S&P BSE Sensex was down 707.67 points at 76,798.20, while the NSE Nifty50 had fallen by 242.55 points to 23,239.60. Despite recent Budget announcements aimed at boosting the economy, global headwinds and sustained foreign investor outflows weighed heavily on market sentiment.
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All sectoral indices, except Nifty Consumer Durables, were trading in the red as the market reacted to the heightened uncertainty. Analysts noted that tax relief measures in the recent Budget provided some cushion to consumer stocks.
Global Trade War Fears Trigger Market Jitters
President Trump’s decision to impose 25% duties on imports from Canada and Mexico and a 10% duty on Chinese goods has raised concerns about a potential global trade war. Forex traders attributed the rupee’s depreciation to sustained dollar demand from oil importers and weak risk appetite among investors.
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“The start of the week saw financial markets on edge as President Trump followed through on his tariff threats, imposing duties on imports from key trading partners,” said Amit Pabari, MD of CR Forex Advisors. “This escalation has fuelled risk aversion, driving safe-haven demand for the US dollar.”
🚨#Rupee hits all-time low, opens below 87 against the US #dollar after Trump imposes tariffs
More details here👇https://t.co/zJMt1CfT8F#US #DonaldTrump #Tariff #TrumpTariffs #TradeWar pic.twitter.com/7qYc2iSvJ5
— Moneycontrol (@moneycontrolcom) February 3, 2025
The dollar index, which measures the greenback’s strength against a basket of six major currencies, surged 1.30% to 109.77. Major Asian currencies also faced pressure, with the yuan dropping to 7.3551, the Indonesian rupiah at 16,448, and the Korean won at 1,470.
Stock Market Sees Broad Declines
Heavyweight sectors such as banking, financial services, IT, metal, and energy led the market decline. By mid-morning, the BSE Sensex was trading 575.89 points, or 0.74% lower, at 76,930.07 points, while the Nifty fell 206.40 points, or 0.88%, to 23,275.75 points.
Foreign institutional investors (FIIs) offloaded equities worth Rs 1,327.09 crore in the capital markets on Saturday, exacerbating the market pressure.
RBI Intervention Anticipated
At the interbank foreign exchange, the rupee opened at 87.00 and slipped further to 87.29 against the greenback, marking a 67-paise plunge from its previous close of 86.62.
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors, said, “The rupee is expected to trade between 86.65 and 87.00 today, with the Reserve Bank likely to intervene to stabilize dollar bids.”
India’s forex reserves rose by USD 5.574 billion to USD 629.557 billion in the week ended January 24, the Reserve Bank said on Friday. However, the reserves have seen a declining trend recently due to revaluation and market interventions by the central bank to curb volatility in the rupee.
Analysts predict continued volatility in the markets amid global trade tensions and foreign investor activity. While the recent Budget provided some optimism, the broader impact of escalating tariffs and the resulting trade war will likely shape market movements in the coming weeks.
