Nifty Smallcap 100 plunges over 10% to 15-month low as trade war jitters spark risk-off mood

Stock market crash: Indian stock markets came under heavy pressure on Monday, April 7, as mounting fears of a global slowdown — fueled by recession concerns in the U.S.— continued to rattle equities worldwide. The heavy sell-off which began last week following the imposition of traiffs by U.S. President Donald Trump, extended into this week, triggering another wave of sell-off across Asian markets.

Although both the Nifty 50 and Sensex crashed over 5% to their respective day’s lows, the fall was relatively lower compared to other Asian peers, many of which tumbled over 10%. At one point, Japanese and Taiwanese markets even hit their respective lower circuits.

The stock market crash today significantly affected Indian small-cap stocks, causing the Nifty Smallcap 100 index to plunge 10.14% and reach a 15-month low of 14,084 points. Today’s drop also marks the biggest intraday fall for the index since June 2024. At 01:00 P.M., the index was trading with a cut of 6%.

All 100 constituents of the index witnessed deep cuts, with Newgen Software Technologies emerging as the biggest loser, plunging 11%. Other stocks such as Garden Reach Shipbuilders, BEML, Anant Raj, Swan Energy, and Afcons Infrastructure tumbled between 8% and 10%. Notably, 75 stocks in the index have fallen over 5%.

Investor sentiment toward risky assets was shaken by Trump’s sweeping reciprocal tariffs on major trading partners last week, heightening fears of a full-blown global trade war.

The aggressive move by Trump has triggered immediate retaliation from countries like China, escalating trade tensions and also raising fears that other affected countries may soon follow suit, which is unsettling investors.

Nifty Smallcap 100 is now down 29% from its peak

The segment, which had seen some relief in March after enduring severe pressure for five consecutive months, resumed its downward streak this month following Trump’s imposition of a reciprocal tariff on Indian imports.

Today’s sharp crash has dragged the Nifty Smallcap 100 index to trade 29% (taking today's low into account) below its September peak of 19,716 points. Nearly 85 stocks are now down between 20% and 62% from their respective one-year highs.

Trump slapped a flat 26% tariff on imports from India last week, with New Delhi stating it was examining both the "implications" and "opportunities" arising from the duty hikes.

The trade tensions are also prompting overseas investors to pull out funds from emerging markets, including India, with FPIs remaining net sellers in Indian stock markets for the last five trading sessions, withdrawing over ₹16,543 crore from domestic equities.

Their sentiment had turned bullish in March after being net sellers for five consecutive months, but Trump’s aggressive tariff policies have once again dampened their outlook.

What should investors do amid heightened volatility?

Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that globally, markets are going through heightened volatility caused by extreme uncertainty. “No one has a clue about how this turbulence caused by Trump tariffs will evolve. Wait and watch would be the best strategy in this turbulent phase of the market,” he noted.

He highlighted a few important points for investors to keep in mind. “One, the irrational Trump tariffs will not continue for long. Two, India is relatively better placed since India’s exports to the US as a percentage of GDP are only around 2 percent, and, therefore, the impact on India’s growth will not be significant,” he said.

He added that India is negotiating a bilateral trade agreement with the US, which is likely to be successful and may result in lower tariffs for India.

“Domestic consumption themes like financials, aviation, hotels, select autos, cement, defense, and digital platform companies are likely to come out relatively unscathed from the ongoing crisis,” Dr. Vijayakumar said. He also pointed out that Trump is unlikely to impose tariffs on pharmaceuticals since he is on the back foot now, and, therefore, this segment is likely to show resilience.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.