Share market down: A bullish start to the Indian stock market on the first day of the business week disappeared within hours. After falling for eight straight weeks in the past 25 years, investors were feeling that Dalal Street would be back in the red. Sensex and Nifty saw significant buying as soon as the bell rang in the morning. But this greenery did not last long. As soon as Union Finance Minister Nirmala Sitharaman’s statement on India-US trade agreement came out of New Delhi, panic spread in the market. In no time, the Sensex fell over 750 points from its intra-day high and the Nifty also fell.

After the initial boom, the market slumped

The beginning of the trading session was indeed a relief. The Sensex rose 722.23 points to 72,631.93. Along with this, the Nifty also jumped by 199.85 points and reached the level of 22,621.80. Investors, troubled by the continuous decline of the last eight weeks, felt that the market was now stabilizing. But by afternoon the whole picture had changed.

The selling pressure was so intense that the Sensex fell 791.75 points from its high to 71,840.18. A similar situation was seen in the Nifty, which fell 224.70 points from its intraday high to settle at 22,397.10. The biggest reason for such a sudden fall in the market was not any domestic economic data, but the news of an event in New Delhi.

Why is the trade deal stalled?

According to a Moneycontrol report, Finance Minister Nirmala Sitharaman spoke openly on the ongoing trade deal between India and the US during an event held in New Delhi. He made it clear that talks on a trade agreement between the two countries have almost stalled at this point. This statement of the Finance Minister has dealt a big blow to the confidence of the investors.

The finance minister clarified that the talks between the two countries have not yet completely stopped, but after long discussions and several rounds of negotiations, both sides have reached a position from which it seems very difficult to move forward. Now the situation is such that it is not easy for any country to give or take something new. He said that if there is any scope left for furthering the dialogue, the two countries will definitely use it. But it has now become very difficult for both sides to reach a new agreement beyond their existing terms.

Nirmala Sitharaman also said that currently the balance of trade between the two countries is in favor of India. America’s trade deficit with India continues. The US administration is pressuring India to buy more and more goods from their country, so as to reduce the trade imbalance between the two countries.

Tariffs become a new weapon of pressure

To illustrate this whole issue of trade imbalance, the Finance Minister gave the example of China. He said there is similar trade imbalance between India and China. Since 2014, India’s trade deficit with China has grown at a very rapid pace. But he raised a fundamental question: Can a reduction in the trade deficit alone be the main condition of a major agreement? If so, to what extent it can be reduced through dialogue alone.

The Finance Minister also spoke about the changing pattern of global trade. He said that the purpose of earlier trade talks was that the two countries were moving past their respective problems and disparities. After this, a solution was found through conversation. If a country wants to increase the access of its goods to another country’s market, in return it gives more access to the other country’s goods. That is, the whole system was run on a give and take basis on both sides.

But now the atmosphere has changed. To overcome the trade imbalance, other methods are being resorted to. He said that now import duty i.e. tariff has become a big weapon. Earlier, tariffs were used during negotiations under a fixed framework, but now they are used only to create pressure.

What did the US Trade Representative say?

On the other hand, the side of the American administration has also come forward in this whole matter. US Trade Representative Jameson Greer expressed his thoughts on the status of this deal. Greer says that the Trump administration is working on the final stages of this agreement with India. However, he also made it clear that this agreement is not going to happen soon.

Greer informed that during the G-20 meeting, he had a very good conversation with India’s Commerce Minister Piyush Goyal. He said that the issues on which there are differences between the two countries have been identified. Now both parties are working to resolve those critical issues.

According to market insiders, till the uncertainty over the deal between the two countries is over, the Dalal Street may remain volatile. The trade deal, stuck between the tough stances of both the countries, has now become a sensitive issue for the stock market. For this reason, after the initial boom, the market suddenly crashed.