The Indian stock market experienced a dramatic downfall on Monday, as the bearish sentiment gripped Dala Street, resulting in a staggering loss of nearly ₹10 Lakh crore in investors' wealth. With the market capitalization of all listed companies on the Bombay Stock Exchange (BSE) dropping by ₹9.48 lakh crore to settle at ₹410.03 Lakh crore, the situation is raising concerns among investors and analysts alike.
Key highlights
- Bearish market trends, the Sensex and Nifty witnessed significant losses, failing over 1%. The S&P BSE Sensex dropped by 677.78 points to 75,512.78, while the NSE Nifty 50 declined by 217.45 points to 22,874.75 as of 12:42 AM.
- Global and domestic factors, the downturn can be attributed to a mix of global uncertainties, weak market sentiment, and persistent foreign portfolio investor (PFI) outflows, leading to mounting pressure on the domestic market.
- Investor outlook, investors are now focusing on potential fiscal stimulus measures, such as income tax cuts, in the upcoming Union Budget as a source of relief.
What’s behind the crash?
The ongoing market crash has sent ripples across Dalal Street, with investors grappling with both domestic and international challenges. One of the primary factors contributing to the downward spiral is the sustained selling pressure from Foreign Portfolio Investors (FPIs), who have withdrawn ₹69,000 crore from Indian markets as far as January 2025. Despite a counteracting buy-in by domestic institutional investors (DIIs) amounting to ₹67,000 crores, the sell-off has overwhelmed the domestic market.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that the market could remain volatile in the short term. He highlighted significant upcoming events such as the US Federal Reserve’s decision. “The market policy is hoping for fiscal stimulus through income tax cuts in the budget, and if these expectations are met, we could see a relief rally. However, for this rally to sustain, growth and earnings revival data are crucial, “Dr. Vijaykumar said.
Global concerns weigh on market sentiment
Global factors are also playing a pivotal role in the market’s poor performance. Trivesh, COO of Tradejini, shared his concerns over the tightening of global liquidity, as the US Federal Reserve is expected to announce its next monetary policy decision, raising questions about its impact on the global economy. In addition to this, geopolitical risks are further adding to market uncertainty. Trade tensions, including rising tariffs and global competition, particularly from China’s growing technology sector, have escalated fears of a broader economic slowdown.
Adding to the strain, global crude oil prices have remained under pressure, reflecting worries over slowing demand and reduced growth prospects. India, a major importer of crude oil, is particularly sensitive to such shifts in global oil, prices, compounding the challenges for the stock market.
Corporate earnings and market outlook
In addition to global uncertainties, disappointing quarterly corporate earnings have failed to provide any support to the markets. Persistent foreign institutional investors' outflows, combined with global risk aversion, have resulted in capital flight, further pressuring domestic equities. Investors are also eyeing the Union Budget, hoping for relief measures like income tax cuts, which could stimulate growth and restore market confidence.
Kranth Bathini, Equity Strategist at WealthMills Securities, highlighted that Nifty trading below the crucial 23,000 level has sparked panic selling, especially in mid-cap and small-cap stocks. “The market is also cautious ahead of the Union Budget and the upcoming Reserve Bank of India’s monetary policy decision, “Baithini remarked.
Kranthi Bathini, Equity Strategist at WealthMills Securities, highlighted that Nifty trading below the crucial 23,000 level has sparked panic selling, especially in mid-cap and small-cap stocks. "The market is also cautious ahead of the Union Budget and the upcoming Reserve Bank of India’s monetary policy decision,” Bathini remarked.
As the market faces continued volatility, investors are hopeful that the Union Budget will provide some much-needed relief. However, the uncertainty surrounding the budget’s fiscal measures, alongside external global factors, keeps the market in a precarious state.