Why Is The Stock Market Plummeting? Six Key Factors Impacting Sensex And Nifty50

Indian benchmark equity indices, Sensex and Nifty50, witnessed a sharp decline on Monday, marking the second consecutive session of losses. Concerns over weak corporate earnings, uncertainty surrounding US trade policies, and continued foreign outflows have contributed to the downward pressure on Dalal Street. The BSE Sensex dropped 763 points, or 1%, to 75,434, while the Nifty50 fell 240 points, or 1.04%, to 22,851 at 11:03 am. The total market capitalization of all listed companies on the BSE fell by Rs 9.48 lakh crore, settling at Rs 410.03 lakh crore.

Why is the Stock Market Falling Today?

1. US Policy Uncertainty: One of the key factors contributing to the decline is the uncertainty surrounding US trade policies. Recently, President Donald Trump announced plans to impose 25% tariffs on Colombia after it initially refused to accept deported migrants. While this situation was resolved, fears linger about potential tariffs on Canada and Mexico, which could add further strain on global markets. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the possibility of new tariffs has caused anxiety among investors.
2. Nervousness Ahead of Fed Rate Decision: Another factor weighing on investor sentiment is the upcoming US Federal Reserve rate decision. While analysts expect the Fed to maintain current interest rates, the markets are eagerly awaiting the Fed’s commentary, which could offer insights into future monetary policy decisions. The anticipation surrounding President Trump’s calls for lower borrowing costs has only added to investor anxiety.
3. Earnings Slowdown: The earnings season has begun on a weak note, with Nifty50 companies expected to see just a 3% year-on-year growth in earnings per share for Q3. Sectors such as metals, chemicals, consumer staples, banks, and oil & gas are expected to underperform, while industries like capital goods, healthcare, and telecom are projected to show stronger growth.
4. Continued Foreign Institutional Investors (FII) Selling: Persistent selling by foreign institutional investors has continued to pressure the market. As of January 24, 2025, FIIs have offloaded Rs 64,156 crore worth of equities, showing no signs of halting their selling spree. The sustained outflow of foreign capital is a major concern for investors, contributing to the market’s ongoing struggles.
5. Dollar Strength: Additionally, concerns about the strengthening of the US dollar amid tariff fears have added to market volatility. The dollar index, which tracks the greenback against a basket of major world currencies, rose 0.21% to 107.66. Although some analysts believe the strength of the dollar may be temporary, it continues to add pressure on global markets.

Bears Dominate Dalal Street: Sensex and Nifty50 Suffer Losses in 2025

On Monday, the bears took control of Dalal Street, as both the Sensex and Nifty50 fell over 1%, continuing their downward trend into the new year. The Sensex fell by 677.78 points to 75,512.78, while the Nifty50 dropped 217.45 points to 22,874.75 by 12:42 pm. The decline resulted in a market capitalisation loss of nearly Rs 9.48 lakh crore, dropping to Rs 410.03 lakh crore.

Expert Views on Market Outlook

Experts attribute the decline to a combination of weak market sentiment, global uncertainty, and foreign portfolio investor (FPI) selling. Dr. V K Vijayakumar noted that the market is likely to remain volatile due to major events such as the upcoming Federal Reserve decision and the Indian Union Budget. The market is hoping for fiscal stimulus measures, including income tax cuts, in the Budget to revive investor sentiment. However, the uncertainty surrounding the Budget has caused increased volatility.

Global Concerns Add to Market Troubles

Global uncertainties have also played a significant role in dampening investor sentiment. Tensions around US trade policies, including the possibility of new tariffs on Colombia, Mexico, and Canada, have caused widespread concerns. Geopolitical risks, including China’s rise in the AI space and the global competition it has triggered, have further unsettled markets.

Additionally, the rising prices of crude oil, influenced by global demand concerns, have added to India’s economic challenges, as the country is a major oil importer. The combination of weak corporate earnings and continued FII outflows has added to the downward pressure on domestic equities.

Looking Ahead: Will the Market Rebound?

Investors are also keeping a close eye on the Union Budget, scheduled to be presented soon. Many are hoping for fiscal measures, including income tax cuts, to stimulate growth and improve investor confidence. However, the uncertainty surrounding the Budget has led many investors to adopt a cautious stance, contributing to the ongoing market volatility.

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