Sensex Crashes 2,290 Points in 5 Sessions, Nifty Tanks 667—7 Reasons Behind the Fall

The Indian stock market has faced intense selling pressure over the past five trading sessions, wiping out nearly ₹9 lakh crore of investor wealth. The benchmark indices, Sensex and Nifty 50, have both suffered steep losses, reflecting heightened concerns over economic uncertainty, global trade tensions and sustained foreign investor outflows.

Market Performance Over the Last Five Sessions

The past week has been brutal for equity investors. On February 11, the Sensex opened at 77,384.98 against its previous close of 77,311.80 but quickly tumbled by 1,281 points during the session to touch a low of 76,030.59. The Nifty 50, too, started at 23,383.55 and dropped 395 points, or 1.7%, to fall below the 23,000 mark, ending the day at 22,986.65.

At the close of trading on Tuesday, the Sensex had shed 1,018 points (1.32%) to settle at 76,293.60, while the Nifty 50 ended 310 points lower at 23,071.80. Including Tuesday’s decline, the Sensex has lost 2,290 points in five trading sessions, while the Nifty 50 has tumbled by 667 points or 2.8% over the same period.

The sell-off was particularly intense in the midcap and smallcap segments, which significantly underperformed the broader markets. The BSE Midcap index fell 2.88%, while the Smallcap index plunged 3.40% in a single session. Over the past five days, the cumulative loss for investors has amounted to a staggering ₹18 lakh crore, bringing the overall market capitalization of BSE-listed firms down to ₹408 lakh crore from ₹426 lakh crore on February 4. Source: Livemint

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7 Key Factors Driving This Market Crash

Several factors have contributed to this sharp market decline. Here are the seven major reasons behind the fall:

1. Escalation of U.S. Trade Tariffs

One key factor rattling global equity markets is the U.S. government’s decision to impose a blanket 25% tariff on steel and aluminum imports. The move removes previous exemptions for certain countries and is expected to disrupt global trade flows and increase inflationary pressures. Investors fear that such protectionist measures could lead to retaliatory actions by other economies, further complicating international trade relations and slowing down economic growth.

The tariffs will take effect on March 4 and apply to all countries without exception. This uncertainty has led to a risk-off sentiment, prompting foreign investors to pull money out of emerging markets like India.

2. Persistent Foreign Investor Selling

Foreign institutional investors (FIIs) have been exiting Indian equities alarmingly. Since October 2024, FIIs have sold over ₹2.75 lakh crore worth of Indian stocks. In February alone, FIIs offloaded ₹12,643 crore from the cash segment as of February 10. The selling spree has been fueled by global economic uncertainty, higher U.S. bond yields, and concerns over slowing domestic growth.

With interest rates in the U.S. remaining high, foreign investors are reallocating capital to safer, more lucrative assets, such as U.S. Treasuries, which offer higher yields with lower risk. Source: Livemint

3. Weak Q3 Corporate Earnings

Although India Inc.’s Q3 (December quarter) earnings showed marginal improvement compared to previous quarters, they failed to meet market expectations. Key sectors such as consumer staples, auto, and building materials delivered disappointing results, raising concerns about overvaluation in several stocks.

According to analysts, the earnings recovery has been weaker than anticipated, with companies struggling to maintain profit margins amid rising input costs and muted consumer demand. This has led to a re-evaluation of stock prices, triggering heavy selling in these sectors.

4. Rupee Depreciation

The sharp decline in the Indian rupee against the U.S. dollar has also contributed to market nervousness. The rupee recently fell close to the 88-level, marking a nearly 3% depreciation this year alone. A weaker rupee increases import costs, exerts inflationary pressure, and erodes investor confidence, leading to further foreign capital outflows.

However, on Tuesday, the rupee recovered slightly, gaining 61 paise to settle at 86.84 against the U.S. dollar amid speculation of an intervention by the Reserve Bank of India.

5. Rising U.S. Bond Yields and Dollar Strength

Higher U.S. Treasury yields and a strengthening dollar have made emerging markets like India less attractive to global investors. The U.S. 10-year Treasury yield has risen to 4.519%, while the 2-year yield stands at 4.283%. Meanwhile, the U.S. dollar index has surged to 108.26.

As bond yields increase, fixed-income securities become more appealing than equity investments, leading to capital flight from riskier assets, including Indian stocks.
Source: Economic Times

6. Sectoral Pressure on Auto, Realty, and Pharma Stocks

All major sectors have ended in the red, with the worst-hit being real estate, pharma, consumer durables, PSU banks, auto, and FMCG. Nifty Realty and Healthcare indices fell 2-3%, while Nifty Bank and Financial Services indices dropped over 1%.

Major banking stocks, including HDFC Bank, ICICI Bank, and Kotak Mahindra Bank, lost up to 2.1% each, collectively contributing 235 points to the Sensex’s overall decline. The auto sector also saw a significant correction, with stocks like Eicher Motors tumbling due to weaker-than-expected earnings and demand concerns.

7. Global Market Weakness

Equities worldwide have remained under pressure amid growing geopolitical uncertainties and volatile economic indicators. Asian markets, including the Hang Seng, slipped into the red, while the S&P 500 futures fell 0.2%. European markets also reflected investor anxiety, with Euro Stoxx 50 futures declining. The strengthening U.S. dollar and rising bond yields have triggered a shift toward safe-haven assets like gold, further reducing the appeal of riskier equities. Source: Money Control

Looking Ahead

The Indian stock market remains highly volatile, with investors closely monitoring global and domestic cues. In the near term, markets are expected to remain choppy due to upcoming policy decisions, earnings results, and macroeconomic data releases. The focus will be on whether foreign selling pressure eases and whether there are signs of stabilization in corporate earnings and economic indicators.

While short-term fluctuations are inevitable, investors must closely watch fundamental factors that could determine the market’s direction in the coming weeks.

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