What has US President Donald Trump unleashed on the world economy? That’s the question in the minds of global market experts and economists as the world enters a period of heightened volatility and uncertainty due to Trump’s reciprocal tariffs and the possibility of a trade war due to retaliatory measures by other countries.
China has already announced 34% tariffs as a counter – a step that Trump has warned may invite another 50% tariffs on the world’s second largest economy.
Asian financial markets experienced sharp declines on Monday, following the significant crash on Wall Street in the previous week. Trump maintained his stance on comprehensive import tariffs affecting most nations, stating he would continue unless countries balanced their trade relationships with the U.S.
The Japanese market witnessed severe turbulence, with the Nikkei 225 index recording an initial decline of nearly 8% at opening. By midday, the index stabilised at a 6% decrease. Other regional markets showed substantial losses, with Hong Kong’s Hang Seng falling 9.4%, whilst the Shanghai Composite declined 6.2%, and South Korea’s Kospi reduced by 4.1%.
Indian stock markets have not been spared either. BSE Sensex and Nifty50 crashed around 5% in trade on Monday, before making a smart recovery in the last hour of trading.
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Market analysts indicate that this year’s unprecedented market decline has compelled investors to exercise heightened caution whilst dealing with the present difficult conditions.
The current stock market downward trend in India stems primarily from the widespread weakness observed across global markets, significantly impacting investor confidence.
“However, any signs of stabilization or improvement on the global front are likely to ignite a powerful recovery in the Indian markets, revitalizing confidence and sparking renewed optimism among market participants,” said Rajesh Bhosale, Technical Analyst, Angel One.
April 7 Stock market crash amongst the worst in history
The day’s sell-off left investors poorer by Rs 14.2 lakh crore with BSE’s market capitalisation now at Rs 389.3 lakh crore.
The April 7, 2025 crash in the Indian stock markets is the third biggest market cap loss in a single day. It’s also the sixth biggest single-day crash on the BSE Sensex in terms of points.
The US exposure – businesses taking the maximum hit
Investors are heavily offloading shares of companies that have substantial business interests in the US, as concerns mount over a potential recession in the largest economy and a worldwide business slowdown
In India’s stock market, share prices have declined considerably across various sectors including automobile and components, metal manufacturing, information technology, pharmaceutical, textile manufacturing, and precious stones & ornaments.
Among major business houses, the Tata Group, which has significant US market presence, has witnessed the largest decline in total market value since the fresh tariff proposals were announced late on April 2. The group’s market capitalisation has reduced by approximately Rs 2.4 lakh crore to Rs 25.5 lakh crore. The Mukesh Ambani-controlled Reliance Industries group follows with a market value reduction of about Rs 1.3 lakh crore.
FIIs bail out – $1 billion gone in a day!
The market decline on Monday was primarily driven by overseas investors who offloaded shares valued at Rs 9,040 crore. Foreign institutional investors withdrew more than Rs 9,000 crore ($1.04 billion) from Indian equity markets, marking the second-largest divestment of Indian shares by value in the current year.
In contrast, domestic institutional investors demonstrated confidence by making net purchases amounting to Rs 12,122 crore.
The Big Global Recession & Stagflation Risk
- Several major investment banks have raised the probability of a US and global recession with the trade war creating an environment of uncertainty. JP Morgan and Goldman Sachs have raised the likelihood of US recession further.
- Donald Trump’s reciprocal tariffs and retaliations from major economies like China may fuel inflation globally, while also leading to a major economic slowdown, which may ultimately lead to a recession, fear experts.
- The ripple effect of high inflation and stagnating growth or economic contraction may be extremely painful for the world economy, experts warn.
- According to a Bloomberg report, BlackRock Inc.’s Chief Executive Officer Larry Fink has said that numerous CEOs that he is in touch with believe the US has entered a recession, cautioning that equity markets might experience further downturns due to President Donald Trump’s trade policies disrupting global economic stability.
- “The economy is weakening as we speak,” Fink, 72, said during an interview on Monday at the Economic Club of New York, whilst predicting additional economic deceleration in the upcoming months.
- Fink has expressed scepticism about multiple Federal Reserve rate reductions this year, suggesting that inflation rates would likely remain high.
- Following Wednesday’s tariff announcement, the S&P 500 experienced a substantial decline of 10.5% across two trading sessions, resulting in a market value fall of nearly $5 trillion. This represents the steepest two-day decline since March 2020. The index continued its downward trend on Monday with a 0.23% decrease.
- The Trump administration seems largely unconcerned about the US market rout. “Sometimes you have to take medicine to fix something,” Trump has said.
- “The United States has a chance to do something that should have been done decades ago. Don’t be Weak! Don’t be Stupid! Don’t be a Panican (A new party based on Weak and Stupid people!). Be Strong, Courageous, and Patient, and GREATNESS will be the result!” he said on social media.
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Indian Markets in ‘unknown’ territory, but there’s a silver lining
Top fund managers and strategists said world markets were in unknown territory, and hence risks are high. However, they said given India’s small share in global trade, the impact could be limited.
Narendra Solanki, who leads Fundamental Research – Investment Services at Anand Rathi Shares, expresses a positive long-term perspective regarding the Indian economy
He maintains a 12-month target of 26,000 for Nifty50. Recent market volatility has emerged following the tariff announcement by former US President Donald Trump, raising concerns about global trade patterns and capital movements.
However, he considers this disruption to be temporary. Whilst these short-term disturbances may temporarily affect investor confidence, corporate earnings visibility and asset price returns, they are unlikely to impede India’s fundamental growth trajectory, he told TOI.
In today’s unpredictable global environment, India maintains a relatively protected and insulated position, according to A Balasubramanian, MD & CEO, Aditya Birla Mutual Fund.
“India’s domestic fundamentals remain strong, with a large economy and minimal direct impact from the tariff changes. Additionally, falling oil prices could help reduce inflation, potentially leading to rate cuts that would support growth.”
India’s resilience against worldwide disruptions stems from its robust internal economic framework, whilst policymakers actively implement stabilising measures and ensure effective policy execution, he indicated.
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