“Stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected the US president. The spate of tariff announcements by Trump has been impacting markets and the latest announcement of additional 10 per cent tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favourable to the US,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

It needs to be seen how China will respond to the latest round of tariffs. Even now the markets have not discounted a full blown trade war between the US and China. It is likely to be avoided.

“However, the uncertainty element has increased as reflected in the sharp spike in CBOE volatility index to 21.13,” he said.

Among other external factors, a concern is inflation in Japan. The recent data showed that core consumer prices in Tokyo rose 2.2 per cent in February from a year earlier. Though core inflation slowed for the first time in four months, it remained well above the Bank of Japan’s 2 per cent target. This high inflation number also weighed on investors’ sentiments as it would mean continuation of a tight monetary policy, analysts said. The BoJ could hike rates further, which could impact the Yen carry trade segment.

Mid and small cap stocks continued to remain under heavy selling pressure. The BSE Smallcap index declined 1.93 per cent and BSE Midcap index fell 1.94 per cent.

Foreign portfolio investors (FPIs) have also been relentlessly selling domestic stocks, which is putting additional pressure on the markets. So far in this calendar year, FPIs have pulled out Rs 1.137 lakh crore worth from the domestic market.