Stock market crash: After US President Trump announced trade tariffs, the Indian equity market saw a massive selloff, with the BSE Sensex falling more than 1,200 points and the NSE Nifty falling 320 points. The market value dropped by ₹7 lakh crore.
Stock market meltdown: On Tuesday, January 21, the Indian stock market saw a significant selloff as investors remained wary following the announcement by US President Donald Trump of plans to impose trade penalties on neighboring nations soon after he took office.The major indices, the Nifty 50 and the Sensex, both saw declines of more than 1%. While its NSE equivalent, the Nifty 50, shed 320 points, or 1.37 percent, to close at 23,024.65, the 30-pack Sensex fell 1,235 points, or 1.60 percent, to conclude at 75,838.36.
The Sensex index's biggest losers were shares of Zomato, NTPC, Adani Ports, ICICI Bank, SBI, and Reliance Industries. Shares of Hindustan Unilever ended flat, while only two stocks—UltraTech Cement and HCL Tech—closed higher in the index.
Both the BSE Smallcap and Midcap indices had a 2% decline.
As the overall market capitalization of BSE-listed companies dropped to about ₹424.3 lakh crore from ₹431.6 lakh crore in the previous session, a severe selloff in the Indian stock market erased nearly ₹7 lakh crore of investors' wealth.
As all sectoral indices on the NSE concluded with large losses, investors liquidated stocks in all sectors. Consumer Durables and Nifty Realty saw a significant decline of more than 4% at the end.Financial Services, Auto, and Nifty Bank all closed nearly 2% lower.
What caused today's decline in the Indian stock market?
The following five major elements influence the mood of the stock market:
1. The ambiguity of Donald Trump's trade proposals
Trump announced a number of policies, including tariffs on Canada and Mexico, on his first day in office. Trump has threatened to impose hefty tariffs on India and other nations. The Indian tech industry may be impacted by his immigration plans as well.
"Trump 2.0 has begun with little indication of what Trump's potential economic choices will be. He was explicit about immigration in his inaugural speech, but he seemed evasive about tariffs.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, "the tariff hike policy will be implemented gradually given the indication of a likely 25% tariff on Canada and Mexico."
Investors now worry that Trump's inaugural address to protect American interests could harm the future economic prospects of several nations, including India, according to Prashanth Tapse, Senior VP (Research), Mehta Equities.
2. Exercise caution before the 2025 Union Budget
This mega-policy event is currently the focus of investors' attention. On Saturday, February 1, Finance Minister Nirmala Sitharaman is scheduled to deliver the budget. The administration is expected to introduce policies that will help manufacturing and infrastructure, increase consumption, and bolster the rural economy while being fiscally prudent.
However, the already fragile market attitude could take a further hit if major expectations are not met.
3. Outflow of foreign money
One of the main causes of the current decline in the Indian stock market is the persistent selloff by foreign portfolio investors (FPIs) in the face of rising bond yields and the strengthening US currency. As of January 20, FPIs have sold around ₹51,000 crore worth of Indian stocks every day in January, with the exception of January 2.
4. Q3 earnings were unimpressive.
The December quarter profits thus far have also been lackluster, showing uneven patterns across sectors, following poor Q1 and Q2 earnings. Market morale is being kept low, according to experts, by earnings disappointment.
"The Indian economy is performing well on a fundamental level, but as economic activity has slowed, corporate earnings have been poor for a few quarters. Markets follow profits and cash flows," ICICI Prudential AMC fund manager Priyanka Khandelwal told Mint.
5. Worries over deteriorating macro
The market's cautious attitude has been exacerbated by indications of weakening in the Indian economy.
"The intensity of the private capital expenditure cycle that India should experience is being delayed because we are not witnessing broad-based demand growth in the nation. Non-farm employment is suffering as a result of the government's slowdown in capital expenditures. Therefore, we're witnessing weakness in spite of the policy measures to boost our economy's growth," Khandelwal stated.
Both the BSE Smallcap and Midcap indices had a 2% decline.
As the overall market capitalization of BSE-listed companies dropped to about ₹424.3 lakh crore from ₹431.6 lakh crore in the previous session, a severe selloff in the Indian stock market erased nearly ₹7 lakh crore of investors' wealth.
As all sectoral indices on the NSE concluded with large losses, investors liquidated stocks in all sectors. Consumer Durables and Nifty Realty saw a significant decline of more than 4% at the end.Financial Services, Auto, and Nifty Bank all closed nearly 2% lower.
What caused today's decline in the Indian stock market?
The following five major elements influence the mood of the stock market:
1. The ambiguity of Donald Trump's trade proposals
Trump announced a number of policies, including tariffs on Canada and Mexico, on his first day in office. Trump has threatened to impose hefty tariffs on India and other nations. The Indian tech industry may be impacted by his immigration plans as well.
"Trump 2.0 has begun with little indication of what Trump's potential economic choices will be. He was explicit about immigration in his inaugural speech, but he seemed evasive about tariffs.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, "the tariff hike policy will be implemented gradually given the indication of a likely 25% tariff on Canada and Mexico."
Investors now worry that Trump's inaugural address to protect American interests could harm the future economic prospects of several nations, including India, according to Prashanth Tapse, Senior VP (Research), Mehta Equities.
2. Exercise caution before the 2025 Union Budget
This mega-policy event is currently the focus of investors' attention. On Saturday, February 1, Finance Minister Nirmala Sitharaman is scheduled to deliver the budget. The administration is expected to introduce policies that will help manufacturing and infrastructure, increase consumption, and bolster the rural economy while being fiscally prudent.
However, the already fragile market attitude could take a further hit if major expectations are not met.
3. Outflow of foreign money
One of the main causes of the current decline in the Indian stock market is the persistent selloff by foreign portfolio investors (FPIs) in the face of rising bond yields and the strengthening US currency. As of January 20, FPIs have sold around ₹51,000 crore worth of Indian stocks every day in January, with the exception of January 2.
4. Q3 earnings were unimpressive.
The December quarter profits thus far have also been lackluster, showing uneven patterns across sectors, following poor Q1 and Q2 earnings. Market morale is being kept low, according to experts, by earnings disappointment.
"The Indian economy is performing well on a fundamental level, but as economic activity has slowed, corporate earnings have been poor for a few quarters. Markets follow profits and cash flows," ICICI Prudential AMC fund manager Priyanka Khandelwal told Mint.
5. Worries over deteriorating macro
The market's cautious attitude has been exacerbated by indications of weakening in the Indian economy.
"The intensity of the private capital expenditure cycle that India should experience is being delayed because we are not witnessing broad-based demand growth in the nation. Non-farm employment is suffering as a result of the government's slowdown in capital expenditures. Therefore, we're witnessing weakness in spite of the policy measures to boost our economy's growth," Khandelwal stated.
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