Due to negative global signals, the Indian stock market saw a significant decline, with the Sensex plummeting more than 700 points and the Nifty 50 falling below 23,250. Within five minutes, investors lost over ₹5 lakh crore.
Stock market crash: Due to weak global signals, the Indian stock market saw severe losses in early trading on Monday, February 3, with the Sensex dropping more than 700 points and the Nifty 50 collapsing to a level below 23,250.The Sensex dropped more than 700 points to 76,791.09 after opening at 77,063.94 compared to its previous finish of 77,505.96. The Nifty 50 fell 1% to 23,246.55, having opened at 23,319.35 from its previous finish of 23,482.15.
The BSE Midcap and Smallcap indices fell more than 1% each, indicating a more severe selloff in the mid and small-cap sectors.
At approximately 11.15 AM, the Nifty 50 was down 160 points, or 0.64 percent, at 23,337, and the Sensex was 418 points, or 0.54%, below the 77,100 level.
Investors lost almost ₹5 lakh crore as the total market capitalization of the BSE-listed companies fell from ₹424 lakh crore to nearly ₹419 lakh crore in the previous session.
What is behind today's decline in the Indian stock market?
The following five factors were identified by experts as the cause of the decline in the Indian stock market:
1. Ineffective global cues
Weak global cues caused the Indian stock market to react. US President Donald Trump's announcement of tariffs on China, Canada, and Mexico on Monday caused major Asian markets to plummet, igniting fears of a wide-ranging trade war that might affect the expansion of the world economy. Both Korea's KOSPI and Japan's Nikkei saw a 3% decline.
"The Trump tariffs and the increased global uncertainty that these 'initial rounds of tariffs' have triggered will put pressure on the market despite an excellent budget," stated V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Market mood is impacted by the Trump tariff.
US President Donald Trump hit Canada and Mexico with 25% duties, as the media extensively reported. Additionally, imports from China, the United States' largest trading partner, are subject to a 10% charge. Tariffs in retaliation are in effect.
According to experts, Trump's tariff policies could start a trade war that would cause the world economy to collapse.
"It is crucial to realize that Mexico and Canada are being punished for things like immigration and the illegal fentanyl trade by the 25% tariffs that have been placed on them. Regarding non-trade matters, Trump might impose tariffs on other nations once more. China has responded to the 10% tariffs in a more reasonable manner. As of right moment, they haven't responded by putting taxes on US products like Canada and Mexico have. Rather, they are petitioning the WTO to overrule the US move," Vijayakumar stated.
3. The rupee reaches a historic low as the dollar index jumps sharply.
On Monday, the Indian rupee broke through 87 to the US dollar for the first time, opening at a record low. The currency saw significant increases in value relative to several of its counterparts following Trump's sweeping tariffs on Canada, Mexico and China.
"The market will be under pressure as a result of FIIs (foreign institutional investors) selling more when the dollar index rises to above 109.6," Vijayakumar stated.
4. Exercise caution before the RBI MPC
All eyes are on the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meeting's decision now that the Union Budget has concluded.
In an effort to increase consumption, Finance Minister Nirmala Sitharaman announced significant modifications to the income tax system. Experts predict that by lowering rates by 25 basis points, the RBI will provide consumers with even more respite.
5. Continued outflow of foreign capital
One of the main causes of the market decline since October has been the relentless selling by foreign institutional investors (FIIs).
Since October 2024, FIIs have been regularly selling Indian stocks, which has negatively impacted investor sentiment. Since then, the Nifty 50 has experienced monthly drops as a result.
The market's downward trend has been exacerbated by FIIs selling off Indian stocks valued at around ₹2.7 lakh crore between October 1, 2024, and February 1, 2025.
4. Exercise caution before the RBI MPC
All eyes are on the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meeting's decision now that the Union Budget has concluded.
In an effort to increase consumption, Finance Minister Nirmala Sitharaman announced significant modifications to the income tax system. Experts predict that by lowering rates by 25 basis points, the RBI will provide consumers with even more respite.
5. Continued outflow of foreign capital
One of the main causes of the market decline since October has been the relentless selling by foreign institutional investors (FIIs).
Since October 2024, FIIs have been regularly selling Indian stocks, which has negatively impacted investor sentiment. Since then, the Nifty 50 has experienced monthly drops as a result.
The market's downward trend has been exacerbated by FIIs selling off Indian stocks valued at around ₹2.7 lakh crore between October 1, 2024, and February 1, 2025.
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