Sensex plummeted by 800 points, resulting in investors losing ₹10 lakh crore. What factors contributed to the sharp decline in the Indian stock market today
Sensex: Today in the stock market, the Indian market experienced significant losses during intraday trading on Monday, January 27th. The benchmark Sensex dropped nearly 900 points, while the Nifty 50 fell to around 22,800 due to a sharp selloff across various sectors.
The Sensex hit an intraday low of 75,267.59 before closing at 75,366.17, marking a loss of 824 points or 1.08%. Similarly, the Nifty 50 reached 22,786.90 during the session but ended at 22,829.15, down 263 points or 1.14%. This decline marked the second consecutive session of losses for both indices.
The mid and smallcap segments were hit even harder, with the BSE Midcap index dropping by 2.68% and the Smallcap index plunging by 3.51%.
Overall, BSE-listed firms saw their market capitalization decrease from ₹419.5 lakh crore to ₹410 lakh crore, resulting in investors losing nearly ₹10 lakh crore in a single day. Over the past two sessions, investors have collectively lost close to ₹15 lakh crore.
In terms of sectoral indices, all major sectors on the NSE ended the day with losses. The Nifty Media, IT, Metal, and Pharma indices saw declines of 3-4%, while the Nifty Bank, Auto, FMCG, and Realty indices dropped by around 1%.
Experts have identified five key factors driving the sharp selloff in the Indian stock market today:
Budget Focus:
Investors are closely watching Budget 2025, which is expected to strike a balance between fiscal prudence and measures to boost consumption. Some experts anticipate a potentially populist Budget, and any government decisions to lower growth guidance or relax fiscal discipline could further weaken market sentiment.
A populist budget could potentially strain the fiscal deficit, leading to a weaker rupee, reduced rate cuts, and delays in economic growth. Deepak Ramaraju, Senior Fund Manager at Shriram AMC, warns that any deviation from fiscal prudence or lower growth projections could trigger a market selloff.
Furthermore, weak Q3 earnings from Indian corporates have dampened investor risk appetite. The slow recovery in many sectors has exacerbated existing concerns over high valuations and global uncertainties.
Additionally, there has been a significant outflow of foreign capital, with Foreign Portfolio Investors (FPIs) selling Indian equities worth nearly ₹2.5 lakh crore since October. In January alone, FPIs have offloaded over ₹69,000 crore. Devang Kabra, co-fund manager at Wallfort PMS, attributes this trend to currency depreciation, rising crude oil prices, and the lack of interest rate cuts by the US Federal Reserve.
Looking ahead, the upcoming US Federal Open Market Committee (FOMC) meeting on January 28-29 will be crucial. While the Fed cut interest rates by a full percentage point in 2024, experts predict that the rate-cutting cycle may have ended. With strong macroeconomic data and a cautious approach to assessing the impact of President Trump’s policies, the Fed is expected to maintain the status quo in January.
Concerns Surrounding President Trump’s Tariff Policies
Global markets are closely monitoring the tariff policies of US President Donald Trump. Following the imposition of tariffs on Canada and Mexico, President Trump has now threatened a 25% tariff on Colombia due to its refusal to accept deported illegal immigrants. Recent media reports indicate that Colombia has agreed to accept military aircraft carrying deported migrants.
One major concern is President Trump’s tendency to issue new threats, such as the 25% tariff on Colombia for its refusal to take back deported illegal immigrants. The potential implementation of the 25% tariff on Canada and Mexico starting from February 1st adds to the uncertainty. The question now arises whether President Trump will follow through on his threats of tariffs on China and other countries. These uncertainties are causing unease in economic and market circles.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that these concerns are having a negative impact on the markets.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.