Sensex Crashes 2400 Points In 3 Days, Nifty Below 25,000: Why Is The Indian Stock Market Falling?

Why Is Stock Market Falling? The Indian stock market stayed under pressure for a third straight session on Wednesday, January 21, as escalating geopolitical and geoeconomic risks weighed heavily on investor sentiment.

The Sensex slumped more than 500 points, or over 0.60 per cent, to an intraday low of 81,657.93, while the Nifty 50 slipped below its 200-day exponential moving average near 25,150 and touched a low of 25,078.70.

The selling pressure was broad-based, with the BSE Midcap and Smallcap indices tumbling more than 1 per cent each.

Over the past three sessions, the Sensex has plunged over 1,900 points, or more than 2 per cent, while the Nifty 50 has also declined by over 2 per cent.

In just three consecutive sessions, investors have lost

around Rs 15 lakh crore, with the total market capitalisation of BSE-listed companies falling below Rs 453 lakh crore from nearly Rs 468 lakh crore on Friday.

Key factors behind the market decline

1) Rupee hits record low
The rupee slid 31 paise to a lifetime low of 91.28 against the US dollar, weighed down by sustained dollar demand and fragile global sentiment. Forex dealers said rising geopolitical risks and persistent foreign fund outflows from Indian equities continued to pressure emerging market currencies. The rupee opened at 91.05 at the interbank market and weakened further from its previous close.

2) Persistent FII selling
Foreign institutional investors remained net sellers for the 11th straight session in January, offloading equities worth Rs 2,938.33 crore on Tuesday. FIIs have been net buyers only once this month — on January 2 — when they purchased shares worth Rs 289.80 crore.

3) Weak global cues
Asian markets traded in the red, with South Korea’s Kospi, Japan’s Nikkei 225 and Hong Kong’s Hang Seng declining. Overnight, US markets ended sharply lower. The Nasdaq Composite tumbled 2.39 per cent, the S&P 500 slipped 2.06 per cent and the Dow Jones Industrial Average fell 1.76 per cent.

“US equity markets closed sharply lower overnight, with the S&P 500 slipping 2 per cent and the Nasdaq plunging close to 2.5 per cent — the worst single-day fall since October. The sell-off was triggered by renewed trade-war concerns after President Trump escalated tariff threats on select European nations opposing US control over Greenland,” said Ponmudi R, CEO of Enrich Money.

4) India VIX climbs
The India VIX, which tracks market volatility expectations, rose about 4 per cent to 13.22. A rising VIX typically reflects higher uncertainty and risk aversion, prompting investors to cut equity exposure.

5) Tariff war jitters
Investor sentiment remained fragile amid fears of a trade war between the US and the European Union. Trump announced a 10 per cent tariff on eight European countries from February 1, with the levy set to rise to 25 per cent from June 1. European nations are reportedly considering retaliatory steps, raising concerns over global trade and growth.

Media reports also suggest the European Parliament may suspend approval of the US trade deal signed in July.

“There is clear risk-off sentiment in global markets due to Trump’s Greenland policy, tariff threats and Europe’s increasingly firm stance. If tariffs are implemented, Europe will retaliate, triggering a trade war with adverse consequences for global trade and growth,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

6) Sharp selling in banking stocks
Banking shares witnessed heavy selling pressure in line with the broader market weakness. The Bank Nifty declined over 1 per cent, with ICICI Bank, Punjab National Bank, HDFC Bank and State Bank of India falling up to 2 per cent.