Stock market crash: After US President Trump announced trade tariffs, the Indian equity market saw a massive selloff, with the BSE Sensex falling 848 points and the NSE Nifty falling 217 points. The market capitalization dropped to ₹426 lakh crore, a decline of 4.88 lakh crore.
Stock market crash: Shortly after taking office, US President Donald Trump announced plans to impose trade tariffs on neighboring nations, which caused investors to remain cautious and cause a sharp selloff in the Indian share market on Tuesday, January 21.The main indices, the NSE Nifty and the BSE Sensex, both saw declines of around 1%. The NSE Nifty fell 217 points to a low of 23,127.70, while the BSE Sensex plummeted 848 points to the day's low of 76,224.79.
Throughout the session, the BSE Midcap and Smallcap indices fell more than 2% each.
As the overall market capitalization of BSE-listed companies dropped to almost ₹427 lakh crore from ₹432 lakh crore in the previous session, a severe selloff in the Indian stock market erased almost ₹5 lakh crore of investors' wealth.
Why is the stock market in India declining?
The following five major elements are influencing 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."
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.
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