Rupee weakened past 87 to the US dollar for the first time. (Representational)
Equity benchmark indices Sensex and Nifty tumbled in early trade and the rupee hit a record low of 87.29 against the US dollar on Monday after President Donald Trump imposed massive tariffs on Canada, China and Mexico over the weekend, sparking fears of a broader trade war.
The BSE Sensex was down by more than 400 points to 77,084 at 11 am, while the Nifty 50 dropped to 23,320 after losing over 160 points.
Larsen & Toubro, NTPC, Tata Steel, Power Grid, Tata Motors, Reliance Industries, ICICI Bank and Tata Consultancy Services were among the major laggards from the 30-share blue-chip pack, while Titan, Maruti, Nestle and Bajaj Finserv were among the gainers.
"Despite an excellent Budget, the market will be under pressure from the Trump tariffs and the heightened global uncertainty these 'initial round of tariffs' has triggered," the news agency PTI quoted VK Vijayakumar, the Chief Investment Strategist at the Geojit Financial Services, as saying.
Vikram Kasat, the head of advisory of PL Capital of Prabhudas Lilladher, said there is "shock" among investors after Trump followed through on his threat to hit the three countries with tariffs on imports.
He said the near-term market trajectory will depend on "how investors react to something that is almost universally damaging for economic growth".
In other Asian markets, South Korea, Japan, and Hong Kong were also trading sharply lower.
Rupee Drops To Record Low After Trump's Tariffs
The rupee continued to face pressure due to sustained foreign fund outflows and weakened past 87 to the US dollar for the first time.
It dropped to an all-time low of 87.1450 per dollar, down 0.6% from Friday.
The rupee's losses are now approaching 4% since the beginning of October 2024.
Other Asian currencies also tumbled with the Korean won, Malaysian ringgit, Indonesian rupiah and Thai baht dropping 0.9% to 1.2%.
Donald Trump Sparks Trade War
Donald Trump on Saturday slapped Canada and Mexico with 25 per cent duties and China with a 10 per cent duty.
"We need to protect Americans, and it is my duty as President to ensure the safety of all. I made a promise on my campaign to stop the flood of illegal aliens and drugs from pouring across our borders, and Americans overwhelmingly voted in favor of it," he posted on social media after signing three separate executive orders on the tariffs.
The 78-year-old, who has launched numerous tariff threats upon returning to office, later said that Americans may feel economic "pain" from his tariffs on key trading partners, but argued it would be "worth the price" to secure US interests.
"Will there be some pain? Yes, maybe (and maybe not!)" he wrote on his Truth Social media platform on Sunday. "But we will Make America Great Again, and it will all be worth the price that must be paid."
Canada, Mexico, China Respond To Trump Tariffs
In response, Canadian Prime Minister Justin Trudeau announced 25 per cent retaliatory tariffs against Can$155 billion ($106 billion) worth of American goods.
Mexican President Claudia Sheinbaum Pardo also shot back, saying "the problems are not resolved by imposing tariffs, but by talking and dialoguing".
"I instruct the Secretary of Economy to implement Plan B that we have been working on, which includes tariff and non-tariff measures in defense of Mexico's interests," she posted on X.
China said it would challenge Trump's levies at the World Trade Organization.
Trump on Sunday reiterated to place new tariffs on the European Union, saying they have "really taken advantage of us".
"I wouldn't say there's a timeline, but it's going to be pretty soon," he told reporters while reiterating complaints about the US trade deficit with the 27-nation bloc.
The EU, however, on Sunday said it would "respond firmly" if the US President imposes tariffs.
