Sensex Drops 700 Points and Nifty Fall Sharply, Investors Lost ₹5 Lakh Crore In Just a Few Minutes of Trading, Concerns Over Economic Outlook
Today, the Indian stock market saw a sharp decline. The Sensex plummeted more than 700 points, while the Nifty 50 was below 23,250. In just a few minutes of trading, investors collectively lost nearly ₹5 lakh crore. A few factors caused this sharp decline in the market, which negatively impacted market sentiment and investor confidence.
Global trade tensions, selling from foreign investors, a weakening rupee, and concerns over economic policies in the near future contributed to the market downturn.
Why Is the Stock Market Falling? Key Reasons Behind the Market Crash
1. Global Trade Tensions Impacting Sentiment: Weak Global Cues
The US has imposed fresh tariffs on key trade partners including Canada, Mexico, and China. These fresh trade restrictions have fueled fears of a global economic slowdown, thus leading to sharp declines across major Asian stock markets. The Nikkei in Japan and KOSPI in Korea fell almost 3% each.
According to financial experts, these tariffs may prompt retaliatory actions that will create a snowball effect of a trade war, thus affecting the world's trade and economic stability. Indian markets are reacting to this uncertainty, and heavy sell-offs are the result.
2. US Tariffs Spark Investor Worries
US President Donald Trump imposed 25% duties on imports from Canada and Mexico and 10% tariffs on Chinese goods. This move has ignited fears of further economic reprisals, weighing on investor confidence around the world.
3. Foreign Investor Sell-Offs Weighing on Markets
Foreign portfolio investors (FPIs) have been selling Indian equities at an alarming rate. In January alone, FPIs sold nearly ₹1 lakh crore worth of Indian stocks. The trend continued into February, putting further pressure on stock prices and dampening market confidence.
FPIs have dumped almost ₹2.7 lakh crore of Indian equities since October 2024. Soaring US bond yields and a stronger dollar have forced foreign investors to make less money from emerging markets such as India, resulting in constant outflow.
4. Rupee Hits Record Low Against US Dollar
The Indian rupee hit the lowest ever at Rs 87.07 against the US dollar. A stronger dollar and the new US trade policies have caused its decline. A weaker rupee makes imports costlier and increases inflationary pressures, negatively affecting the market.
In short, the Indian rupee saw a historic low of touching Rs ₹87 against the US dollar. Rising interest rates in the US and uncertain international conditions have encouraged selling pressure against emerging markets.
With the US dollar index prevailing at 109.6, experts anticipate that selling by FII continues, thereby keeping Indian stocks in a tizzy.
5. Post-Budget Adjustments Creating Uncertainty
Despite a positive Budget, investors are indeed going through long-term implications. Finance Minister Nirmala Sitharaman has thrown substantial tax relief measures and economic reforms into the ring, but its immediate sectoral impact is yet to be assessed. This keeps investors on tenterhooks, thereby escalating the market volatility.
6. RBI Policy Meet Adds to Market Nervousness
Behind all this is now the RBI MPC meeting, the interest of everyone's eye with expectations that would cut the rate of interest due to support growth in the economy, though one is unsure of the stand from the central bank.
Which sector is getting impacted the most
The sell-off has hurt across sectors. However, major blows have been inflicted on banking, financials, IT, metals, and energy stocks. Midcap and small-cap stocks have not remained immune either, with the BSE Midcap and Smallcap indices falling more than 1%. The only one that shows signs of being relatively resilient is the consumer durables sector, which had tax relief in the budget.
What Should Investors Do Now
The global uncertainty continues, and market analysts ask for caution at this juncture. The US-China trade war, foreign investors' activity, and RBI monetary policy stance are going to decide whether the market stabilizes or continues to go down in the coming days.