Stock Market Crash: Sensex Plummets Over 1,200 Points

Stock Market Crash: Sensex Plummets Over 1,200 Points

Stock market crash: The Indian equity market witnessed a strong selloff in trade on Tuesday, January 21, as investors remained cautious after US President Donald Trump unveiled plans for trade tariffs on neighbouring countries shortly after taking office.

Both benchmark indices BSE Sensex and NSE Nifty declined over 1 per cent each. The 30-pack Sensex declined over 1,300 points to the day's low of 75,641 while its NSE counterpart Nifty 50 lost 368 points to hit a low of 22,977.

The BSE Midcap and Smallcap indices dropped over 2 per cent each in trade today.

A sharp selloff in the Indian stock market wiped out over ₹7.4 lakh crore of investors' wealth, as the total market capitalization of BSE-listed firms fell to approximately ₹425.5 lakh crore from ₹432 lakh crore in the previous session.

Here are five key factors that are weighing on stock market sentiment:

On the very first day in office, Trump made several announcements, including tariffs on Canada and Mexico. Trump has threatened higher tariffs on several countries, including India. His immigration policies could also impact the Indian tech sector.

"Trump 2.0 has kicked off without much clarity on Trump’s likely economic decisions. In his inaugural address, he was clear on immigration but sounded vague about tariffs. The indication of a likely 25 per cent tariff on Canada and Mexico suggests that the tariff hike policy will be implemented gradually," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Investors are now focused on this mega-policy event. Finance Minister Nirmala Sitharaman is set to present the Budget on Saturday, February 1. Expectations are high that the government will announce measures to boost consumption, strengthen the rural sector, and support manufacturing and infrastructure, all while maintaining fiscal prudence.

However, any disappointment in key expectations could deliver another blow to the already weak market sentiment.

A relentless selloff by foreign portfolio investors (FPIs) amid the strengthening US dollar and rising bond yields is a key factor behind the Indian stock market's downtrend in recent months. Except for January 2, FPIs have been selling Indian equities every day in January, offloading nearly ₹51,000 crore as of January 20.

After weak Q1 and Q2 earnings, the December quarter earnings so far have also been unimpressive, exhibiting mixed trends across sectors. Experts say disappointment on the earnings front is keeping market sentiment subdued.

"While the Indian economy is doing fine fundamentally, corporate earnings have been weak for a few quarters as economic activity has slowed. Markets track earnings and flows," Priyanka Khandelwal, a fund manager at ICICI Prudential AMC, told Mint.

The Indian economy is showing signs of weakness, which has contributed to the cautious sentiment in the market.

"We are not seeing broad-based demand growth in the country, which is delaying the intensity of the private capex cycle we should see in India. Government capex has also slowed down, and that’s hurting non-farm employment. Hence, despite the policy interventions to accelerate growth in our economy, we’re seeing softness," Khandelwal said.