fbpx

Why Stock Market Is Down Today? Understanding the ₹5 Lakh Crore Loss in Indian Equities

🗓 

by Ankita Lodh on 3 February 2025,  3 minutes min read

5
(1)

The Indian stock market faced a significant downturn on February 3, 2025, with the BSE Sensex crashing over 700 points, leading to a staggering loss of approximately ₹5 lakh crore in market capitalisation. 

The reasons behind why the stock market is down today are due to various global and domestic factors, which have left investors anxious and questioning the stability of the market.

Source: Google Finance

Also read: Live Budget 2025: Union Budget News Highlights, Key benefits & Income Tax Reforms

Why stock market is falling today in India?

1. Trump’s Tariff Announcement

The primary catalyst for the market’s decline was U.S. President Donald Trump’s decision to impose tariffs on key trading partners—25% on imports from Canada and Mexico and a 10% tariff on Chinese goods

This move has raised fears of an escalating trade war, which could have dire implications for global economic growth. As a result, markets worldwide reacted negatively, with Asian indices like Japan’s Nikkei and Korea’s KOSPI dropping significantly.

2. Weak Global Cues

The Indian stock market opened lower due to negative signals from international markets. The uncertainty surrounding Trump’s tariffs led to a sell-off in equities globally, prompting investors to flee riskier assets. This sentiment was reflected in the Indian market as well, where both the Sensex and Nifty opened sharply lower, with the Nifty slipping below 23,400 points.

3. Foreign Institutional Investors (FIIs) Selling Pressure

Foreign institutional investors have been offloading Indian stocks since late 2024. Reports indicate that FIIs sold nearly ₹2.7 lakh crore worth of equities between October 2024 and February 2025. 

This sustained selling pressure has contributed significantly to the market’s weakness, as foreign capital outflows exacerbate volatility in the domestic markets.

4. Rising U.S. Dollar and Weakening Rupee

The U.S. dollar reached record highs against several currencies, including the Indian rupee, which fell beyond ₹87 per dollar for the first time. A stronger dollar typically makes it more expensive for emerging markets like India to service their dollar-denominated debt, adding further strain to investor sentiment. The dollar index surged above 109.6, prompting additional selling by foreign investors and creating a ripple effect across global markets.

5. Market Reaction to Union Budget

The crash also followed the presentation of India’s Union Budget on February 1, which had mixed reactions from investors. Although it introduced tax benefits aimed at boosting demand, there were concerns about its adequacy in addressing broader economic challenges. 

The market’s cautious stance ahead of the Reserve Bank of India’s upcoming policy meeting added to the uncertainty.

Sectoral Impact

The sell-off affected nearly all sectors, with metal, oil & gas, IT, and real estate stocks among the hardest hit. Analysts noted that mid-cap and small-cap stocks also faced significant declines as investors sought safety in larger blue-chip companies amidst rising volatility. 

Investor Sentiment

Investor sentiment is currently driven by anxiety as many are reassessing their portfolios in light of these developments. The combination of geopolitical tensions, domestic economic policies, and external pressures has created a perfect storm for market volatility.

Analysts suggest that while short-term fluctuations are expected given the current climate, long-term investors may find opportunities amidst the chaos if they can navigate through the volatility wisely. 

Also read: Indian Stock Market Highlights: What is the Future of Share Market in 2025?

Conclusion

The reasons behind why the market is down today serve as a reminder of how interconnected global economies are and how quickly investor sentiment can shift based on geopolitical events. 

It is advisable to stay informed about ongoing developments related to trade policies and monetary policy adjustments by the Reserve Bank of India while considering their investment strategies moving forward.

How useful was this post?

Click on a star to rate it!

Average rating 5 / 5. Vote count: 1

No votes so far! Be the first to rate this post.

Spread the love