Geopolitical Tensions and Tariff Concerns Weigh Down Indian Markets

Indian stock markets opened in the red amid heightened geopolitical tensions and US tariff threats. Foreign portfolio investor outflows and mixed global cues added pressure, leading to cautious sentiment. Despite some local buying, the broader market indices declined with sectoral performances showing varied trends.

The Indian stock market experienced a rocky start on Wednesday, continuing the downward trend from the previous session. The sell-off was attributed to mounting concerns over the recent 25 percent US tariffs on nations trading with Iran, compounded by escalating geopolitical tensions in the region. The persistent outflow of funds from Foreign Portfolio Investors (FPIs) also dampened market sentiment.

At the opening bell, the Nifty 50 index was down by 83.75 points, or 0.33 percent, at 25,648.55, while the BSE Sensex registered a decline of 257.63 points, or 0.31 percent, at 83,370.06. Investors remain wary of global uncertainties, including the US's consistent tariff threats and geopolitical volatility, with FPI sales further exerting downward pressure on Indian equities.

Reflecting on the market's direction, Ponmudi R, CEO of Enrich Money, indicated that the Indian markets may trade in a steady to cautious mode, influenced by a mixed close in the previous session. He pointed out that the sentiment is guarded due to ongoing geopolitical tensions, tariff-related concerns, persistent FPI selling, and rising crude oil prices. While select Asian markets exhibit strength, broader global cues remain mixed.

The market remains in a consolidation phase, characterized by selective buying at support levels and selling pressure at resistance points. This trend was evident in most National Stock Exchange indices, which opened lower. The Nifty 100 index fell by 0.29 percent, the Nifty Midcap 100 slid 0.17 percent, and the Nifty Smallcap 100 experienced minor declines of 0.07 percent.

Sector-wise, the NSE reflected a mixed opening trend with the Nifty Auto index down by 0.08 percent, whereas Nifty FMCG rose by 0.06 percent. The Nifty IT and Nifty Media indices weakened by 0.29 percent and 0.25 percent, respectively. In contrast, the Nifty Metal index gained 0.25 percent, and Nifty PSU Bank climbed 0.21 percent. Meanwhile, FPIs were net sellers in the cash market, selling shares worth Rs 1,499.81 crore, countered by Rs 1,181.78 crore in net buying by domestic institutional investors (DIIs).

Vinod Nair, Head of Research at Geojit Investments, remarked that domestic equities are reeling under renewed concerns about potential U.S. tariffs affecting trade with Iran. This overshadowed the initial optimism inspired by positive remarks from a newly appointed U.S. ambassador regarding trade deals. Investor caution is further heightened by the rupee's weakness, escalating crude prices, elevated US bond yields, and ongoing FPI outflows.

Nair also observed that India's December Consumer Price Index (CPI) remains within the Reserve Bank of India's target range, boosting expectations for future rate cuts. Nonetheless, the start of the Q3 earnings season has been muted, with lackluster results from a leading IT firm setting a subdued tone.

(With inputs from agencies.)