INDIA STOCKS-Indian shares dive as global turmoil deepens after tariff blitz

By Bharath Rajeswaran

April 7 (Reuters) - Indian shares fell sharply on Monday as concerns over a trade war and growing recession fears in the U.S. continued to fuel a global stock market rout.

The Nifty 50 .NSEI and the BSE Sensex .BSESN trimmed some losses from pre-open trade, declining 4.03% to 21,982.05 and 3.86% to 72,455.5, respectively, as of 11:18 a.m. IST.

Both benchmarks lost about 5% at the open, the steepest drop in terms of percentage since March 2020. They are set for their worst single-day decline in 10 months.

Other Asian markets slumped, with the MSCI Asia ex-Japan index .MIAPJ0000PUS losing 7.6%. Japan's Nikkei 225 .N225 dropped 7%.

President Donald Trump's new tariffs are "larger than expected" and the economic impact on inflation and growth will be likely, Federal Reserve Chair Jerome Powell said on Friday, flagging an uncertain outlook for the U.S. economy.

The Nasdaq NDAQ.O confirmed a bear market on Friday, while oil and other commodities plunged amid a massive global market decline following Trump's announcement of sweeping reciprocal tariffs. MKTS/GLOB.N[O/R]

The Nifty volatility index .NIFVIX rose 57%, the most in a session in 10 years to 21.55, and the highest since June 4, 2024.

Investor confidence has plummeted after the reciprocal tariffs and retaliatory measures from China, which has spurred an escalation in the trade war, said analysts.

"Reciprocal tariffs, even if temporary, highlight the increased uncertainty for companies and investors," according to Kotak Institutional Equities analysts, led by Sanjeev Prasad.

"The performance of Indian markets in the next few weeks will depend on whether there is a reconciliation or retaliation in the tariff situation and behaviour of India's retail and domestic institutional investors," Prasad said.

Analysts cautioned that declining returns and increased volatility could diminish the appeal of domestic equities. Multiple brokerages also expect a downside risk to India's fiscal year 2026 GDP growth due to the tariffs.

However, India does not see any hit to projected growth for the fiscal, government officials said on Monday.

Meanwhile, as March-quarter corporate earnings are likely to be muted, the Nifty 50 may test the crucial support level of 21,500-21,800 in this round of market decline, said Saurabh Jain, assistant vice president of research of retail equities at SMC Global.

All the 13 major sectors declined on Monday.

IT companies .NIFTYIT, which earn a significant share of their revenue from the U.S., lost 5%.

The index's high weightage puts the benchmarks under pressure given mounting worries about a potential U.S. recession, said Vinit Bolinjkar, head of research at Ventura Securities.

Metals .NIFTYMET dropped 7%, while financials .NIFTYFIN shed 4%.

The broader small-caps .NISMCP100 and mid-caps .NIFMDCP100 fell 5.9% and 4.8%, respectively.