The SENSEX swung in a wide range of 1,575 points, while the NIFTY 50 index touched an intraday low of 23,136.40 and a high of 23,565.15.

The SENSEX ended 1,390.41 points or 1.80% lower at 76,024.51 and NIFTY50 index dropped 353.65 points or 1.50% to close at 23,165.70, dragged down by selling pressure in index heavyweights like HDFC Bank, ICICI Bank, Infosys, Reliance Industries, HCL Technologies and Bajaj Finance.

Selling pressure in these heavyweights alone added to over 900-point fall in the SENSEX.

Trump tariff threat looms

US President Donald Trump's looming threat of reciprocal tariffs, which will be announced by President Trump on Wednesday, April 2, has led to a selloff in risk assets like equities globally and triggered a buying interest for safe-haven assets like gold and government bonds.

Fears of recession in the US

The 'Liberation Day' tariffs which are to be announced by President Trump have stoked fears of inflation and slowdown in the US economic growth. Meanwhile, global investment bank Goldman Sachs has increased the probability of the US entering recession to 35% from 20%, as the tariff threat will impact the global economy negatively.

The sentiment towards equities further soured after Goldman Sachs also lowered the US GDP growth estimate for the current year to 1.5% from 2.0%.

Selloff across the board

The selloff in Tuesday's session was visible across the board, as all the major sector gauges, barring the measure of telecom shares, ended lower, dragged down by the NIFTY Realty index's over 3% fall. NIFTY IT, Bank, Financial Services, Private Bank, and Consumer Durables metal indices also dropped between 1-2%.

Broader markets also faced selling pressure as both the NIFTY Midcap 100 and NIFTY Smallcap 100 indices dropped nearly 1% each.

Weak technical setup

India VIX, the measure of fear on the National Stock Exchange, spiked 9% to 13.87, indicating markets are engulfing in a bearish grip, analysts said. Meanwhile, weekly options data suggested a range of 500-point swing in the NIFTY50 index from Friday's close. The key support for NIFTY, according to analysts, was placed at 23,260 and resistance around the 23,700 zone.

Analysts added that a break below 23,260 could take the index down to 22,980 levels.

Caution ahead of earnings

After two quarters of subdued earnings posted by Indian companies, all eyes will be on March quarter (Q4 FY25) results. Tata Consultancy Services will be the first company from the NIFTY50 basket to report its March quarter earnings on April 10, followed by ICICI Pru Life, Infosys, HDFC AMC, HDFC Bank and ICICI Bank.

Commentary from IT giants, which earn their significant revenue from the US, will be closely watched by analysts in the wake of ongoing trade wars.

Meanwhile, India's banking veteran and founder of Kotak Mahindra Bank Uday Kotak has flagged serious concern regarding the financial health of Indian banking sector. In a tweet he has claimed that the leading banks in the country are taking deposits at 9% and lending at 8.5%. He added that if the repo rate cut is announced, which is most likely, then it will pose a challenge to the banking business model in the country.