In retaliation to the U.S. announcing a proposed list of products imported from China that could be subject to additional tariffs of 25 per cent amounting to Dollars 50 billion, China on Wednesday too issued new tariffs (implementation date to be declared later) on $50 billion list of USA goods, ranging from soybeans to aircraft, media reports said. Jagannadham Thunuguntla, SVP & head of research (wealth), Centrum Broking, said that just when the stock market was attempting to make a comeback from the bearish sentiment seen during February and March, the re-emergence of a trade war disturbed the momentum.
The 30-share Sensex opened positive and advanced to a high of 33505.53 but succumbed to a sudden selloff in the afternoon, hitting a low of 32972.56.
The Bank Nifty index lost more than 350 points, while the Nifty Midcap index closed down over a percent. The Nifty50 index closed 116.60 points or 1.14 per cent lower at 10,128.40 after falling as much as 130 points to an intraday low of 10,111.30 at day's low. Market breadth, indicating the overall health of the market turned positive. In other Asian markets, Hang Seng closed with a loss of over 2 per cent.
China's retaliation came after trading hours for Japan's Nikkei, which added 0.2 per cent in thin volume, while Chinese blue chips ended down 0.2 per cent.
Meanwhile, the market is looking ahead to the central bank's monetary policy review, due tomorrow. The broader indices outperformed the benchmark indices for a second day in a row as Nifty Mid-cap and Small-cap rose 0.88% and 1.66%, respectively.
The escalating tariff war between the USA and China, with the Asian giant announcing retaliatory trade measures on Wednesday, shaved 352 points off the sensex which closed at 33,019. "Additionally, traders and investors awaited the outcome of the RBI's first monetary policy meeting of the year", said Karthikraj Lakshmanan, senior fund manager-equities, BNP Paribas Mutual Fund. The Bank Nifty index fell 1.5 per cent, with shares of Axis Bank, Kotak Mahindra Bank and Yes Bank declining over 2 per cent each.
Barring five stocks, the rest of the Sensex pack ended in the red.