On Wednesday, the Indian stock market opened on a negative note as investors reacted to the impending review of the Reserve Bank of India's monetary policy. The two primary benchmark indices, BSE Sensex and Nifty50, reflected this cautious sentiment. The BSE Sensex fell sharply by over 350 points, bringing it down to 73,874.49, a decline of 0.48%. Meanwhile, Nifty50 also faced a downturn, trading at 22,423.10, down 113 points or 0.50%.

The previous trading day had already indicated challenges for the markets, and analysts predict that this volatility might persist until there is greater clarity surrounding the US tariffs. While some individual stocks are likely to fluctuate based on their fourth-quarter results and forward-looking forecasts, the broader trend remains uncertain.

In the United States, the S&P 500 index experienced a notable drop on Tuesday, falling below the psychologically significant 5,000-point mark for the first time in almost a year. This decline followed a reversal of early gains, as investors grew increasingly skeptical about the likelihood of any changes to US tariff policies before the midnight deadline.

Asian markets mirrored this uncertainty, opening lower in response to the White House's announcement of extensive tariffs on its trading partners. Among these tariffs is a staggering 104% duty on imports from China, which has further dampened risk sentiment on the continent.

Compounding these market woes, US Treasury yields have been trending upward, indicating a rising interest rate environment. As a result, safe-haven currencies like the Japanese yen and Swiss franc strengthened against the US dollar, showcasing how investors are seeking refuge amidst the chaos. This sudden shift has caused the Chinese yuan to reach historically low levels, highlighting the severe impact of the ongoing trade tensions.

In the commodities market, gold prices faced a decline on Wednesday as US Treasury yields continued to rise. Investors remain wary, closely monitoring the escalating trade tensions, with many expressing concerns about a possible global economic downturn.

Oil prices also suffered, hitting their lowest levels in four years as worries about demand intensified due to the ongoing trade disputes involving the United States. These developments underscore the interconnectedness of global markets and the potential fallout from unilateral trade actions.

In terms of foreign investment activity in India, foreign portfolio investors (FPIs) recorded net sales of Rs 4,995 crore on Tuesday. In contrast, domestic institutional investors showed a more optimistic outlook, purchasing shares worth Rs 3,097 crore. This dichotomy reflects the broader uncertainty in the market, with foreign investors showing caution while domestic players appear more confident.

Furthermore, the net short positions held by foreign institutional investors (FIIs) increased from Rs 1.07 lakh crore on Monday to Rs 1.09 lakh crore on Tuesday, further highlighting the prevailing market anxieties.