The Indian stock market experienced a severe downturn on Tuesday, January 21, as global uncertainties and domestic factors led to a sharp selloff. The BSE Sensex tanked by 848 points to hit a low of 76,224.79, while the NSE Nifty dropped by 217 points, reaching 23,127.70. Both indices showed some recovery later in the session, but investor sentiment remained subdued.
The selloff caused nearly ₹5 lakh crore to be wiped off investors’ wealth, with the total market capitalization of BSE-listed firms falling from ₹432 lakh crore to ₹427 lakh crore. The midcap and smallcap stocks were also severely impacted, with both indices plunging over 2 percent.
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The primary factors behind the market’s decline were a combination of global and domestic concerns:
- Uncertainty over Trump’s Trade Policies: On his first day back in office, US President Donald Trump unveiled plans to implement trade tariffs on countries like Canada and Mexico. His threats of imposing higher tariffs on several nations, including India, have left markets nervous. Additionally, his unclear stance on tariffs and immigration policies raised concerns, especially for sectors like Indian technology.
- Caution Before Union Budget 2025: Investors are awaiting the upcoming Union Budget presentation by Finance Minister Nirmala Sitharaman on February 1. While expectations are high for measures to boost consumption and infrastructure, any disappointment could further dampen market sentiment.
- Foreign Capital Outflow: Foreign portfolio investors (FPIs) have been consistently offloading Indian equities. As of January 20, FPIs had sold nearly ₹51,000 crore worth of Indian stocks, primarily due to the strengthening US dollar and rising bond yields.
- Weak Q3 Earnings: Despite hopes for better earnings, Q3 reports have largely been unimpressive, adding to the market’s woes. Experts indicate that mixed performance across sectors has failed to lift investor confidence.
- Macro-Economic Concerns: A slowing Indian economy and weakening macroeconomic data have further contributed to the cautious market mood.
These combined factors resulted in a significant decline in market value, sparking fears among investors about the future direction of the Indian stock market. Investors now await clearer signals from both global economic policies and upcoming domestic fiscal measures.
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