The Sensex dropped nearly 500 points and the Nifty slipped below 24,450 as investors considered more tariffs; IT and Pharma underperformed

Indian equity markets saw good selling today as renewed tariff concerns soured investor sentiment. The benchmark Sensex fell nearly 500 points, while the Nifty 50 fell under the important 24,450 level, one of the largest single-day drops in the last few weeks.

The market dropped continues with increased global and domestic trade barrier anxiety, especially following reports of a potential increase in import tariffs on limited goods. Additionally, investors were cautious on global cues with increasing geopolitical tensions in addition to declines in other Asian indices. 

Market fracturing IT and Pharma stocks are the worst hit

Of the various sectoral indices, IT and the Pharma stocks were the worst hit with some leading companies under heavy selling pressure. The Nifty IT index fell by more than 2%, with declines in the leading software exporters driven by multiple issues including slowing global economic growth, client spending in Western markets and currency adjustment, namely a stronger rupee affecting export revenues.

Pharma counters were also in the red, due to fears over tougher USFDA regulations and pricing pressures in some of the leading global markets in the US and Europe. The decline in leading drug manufacturers were between 1.5% and 3% in red.

Broader Market Weakness

Although this weakness was not limited to large-caps, the bigger picture was that the broad market also came under selling pressure with mid-cap and small-cap indices lagging the benchmarks. Market breadth lined up negative as declining stocks vastly outnumbered advancers on the NSE and BSE.

Investors appeared to be looking to book recent profits in the aftermath of the domestic equity rally as the uncertainty of how tariff measures would affect India's export driven industries loomed over markets. Not surprisingly, auto, metals and FMCG sectors also closed in the red as broad based risk-off disposition permeated the market.

Global and Domestic Triggers

Globally, concerns over a slowdown in major economies along with erratic crude oil prices have kept many investors jittery. Domestically, the prospect of a higher inflation path, along with the Reserve Bank of India's cautiousness on rate cuts is adding to the angst of the market.

Foreign institutional investors (FIIs) became net sellers in today's session, adding further pressure to the markets, domestic institutional investors (DIIs) couldn't do much to help stop the decline.

Outlook Ahead

Market experts believe that volatility could continue in the near term while investors await additional clarity on trade policies and global macroeconomic trends. Traders should remain cautious, keep stop losses in mind, and own quality stocks that have solid fundamentals. 

According to experts, there will be short-term corrections for long-term investors, but India's growth story is intact and pullbacks provide an opportunity to selectively buy fundamentally sound companies.