Sensex Tanks 848 Points, ₹5 Lakh Crore Wiped Out: 5 Key Reasons Behind Market Rout
The Indian stock market faced a significant selloff today, as both benchmark indices—BSE Sensex and NSE Nifty—suffered steep declines.
The Indian stock market faced a significant selloff today, as both benchmark indices—BSE Sensex and NSE Nifty—suffered steep declines. The Sensex plunged 848 points to hit an intraday low of 76,224.79, while the Nifty fell by 217 points to settle at 23,127.70. This market rout erased nearly ₹5 lakh crore in investor wealth, as the total market capitalization of BSE-listed firms dipped to ₹427 lakh crore from ₹432 lakh crore in the previous session.
The broader indices were hit even harder, with the BSE Midcap and Smallcap indices shedding over 2% each, signaling bearish sentiment across the board. Here are the five key factors driving this market turbulence:
1. Uncertainty Over Donald Trump’s Trade Policies
The return of Donald Trump to the White House has introduced fresh uncertainties for global markets. On his first day in office, Trump announced tariffs targeting Canada and Mexico, with indications of further measures against countries like India.
“Trump 2.0 has kicked off with mixed signals. While he has clarified his stance on immigration, his tariff policies remain vague but concerning. A proposed 25% tariff hike on neighboring countries could be gradually implemented, which raises alarms for global trade,” noted V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The tech sector, heavily reliant on the U.S. for business, is particularly vulnerable, as immigration restrictions could hinder talent movement.
2. Caution Ahead of Union Budget 2025
Investors are bracing for the Union Budget, set to be presented by Finance Minister Nirmala Sitharaman on February 1. Market participants are hoping for measures to boost consumption, rural development, manufacturing, and infrastructure while maintaining fiscal discipline.
However, any failure to meet these high expectations could further dent investor confidence in an already fragile market environment.
3. Persistent Foreign Capital Outflows
Foreign portfolio investors (FPIs) have continued to withdraw funds from Indian equities, exacerbating market weakness. As of January 20, FPIs had offloaded nearly ₹51,000 crore in January alone, driven by a stronger U.S. dollar and rising bond yields.
This relentless selloff is a key pressure point, particularly for sectors like financial services and technology, which are highly reliant on foreign investment.
4. Weak Q3 Earnings
Corporate earnings for the December quarter have disappointed across multiple sectors, following lackluster results in the first two quarters. According to analysts, this earnings slowdown reflects weak economic activity and is dampening market sentiment.
“Fundamentally, the economy is stable, but corporate earnings are not reflecting this strength. Markets tend to track earnings, and the lack of robust results has made investors cautious,” said Priyanka Khandelwal, Fund Manager at ICICI Prudential AMC.
5. Concerns Over Weakening Macro Indicators
The Indian economy is showing signs of strain, with tepid demand growth and a slow private capital expenditure cycle. Government-led capital expenditure has also slowed, impacting non-farm employment.
“Despite policy measures aimed at accelerating economic growth, demand softness and delayed private capex are holding back broader economic recovery,” Khandelwal added.
Outlook for the Days Ahead
With multiple uncertainties, including global trade tensions, the upcoming budget, and weak macroeconomic data, the market outlook remains volatile. Experts suggest investors stay cautious in the short term but look for opportunities in sectors likely to benefit from government reforms.
As the dust settles, all eyes will be on key policy announcements in the Union Budget and global cues, especially from the United States, to determine the market’s next direction.
Disclaimer: The information in this article is for informational purposes only and does not constitute financial advice.
