"Sensex Crashes 800 Points, ₹10 Lakh Crore Wiped Out."

Sensex Crashes 800 Points; Investors Lose ₹10 Lakh Crore: What Drove the Indian Stock Market Down Today?

Overview of the Market Crash

                    On Monday, January 27, 2025, the Indian stock market experienced a significant downturn, with the benchmark Sensex dropping over 800 points and the Nifty 50 falling sharply to 22,829. The session witnessed a selloff across various sectors, resulting in a massive market cap loss of nearly ₹10 lakh crore in a single day.

This marked the second consecutive session of severe losses, bringing the total investor losses over the past two sessions to nearly ₹15 lakh crore.

The Sensex plunged to an intraday low of 75,267.59 before settling at 75,366.17, marking a decline of 824 points or 1.08%. Similarly, the Nifty 50 dropped to an intraday low of 22,786.90 before closing at 22,829.15, down 263 points or 1.14%. The broader market indices, including the BSE Midcap and Smallcap indices, suffered even steeper declines, losing 2.68% and 3.51%, respectively.

Sectoral Performance

All major sectoral indices on the NSE ended the day in the red. Key highlights include:

Nifty Media, IT, Metal, and Pharma: These indices faced heavy losses, falling between 3% and 4%.

Nifty Bank, Auto, FMCG, and Realty: These sectors saw declines of around 1% each.

This widespread selloff reflects a combination of domestic and global factors that have significantly dampened market sentiment.

Key Factors Behind the Market Decline
1. Budget 2025 in Focus

Investors are closely monitoring the upcoming Budget 2025, which is expected to strike a balance between fiscal discipline and measures to stimulate consumption. Concerns about a potentially populist budget have added to market anxiety.

Deepak Ramaraju, Senior Fund Manager at Shriram AMC, explained, “A populist budget may strain the fiscal deficit and weaken the rupee, potentially delaying economic growth. Any deviation from fiscal prudence or lower-than-expected growth guidance could exacerbate the market selloff.”

2. Weak Q3 Earnings

The December quarter (Q3) earnings of Indian corporations have been underwhelming, further eroding investor confidence. Many sectors reported slower-than-expected recoveries, compounding concerns over stretched valuations and global economic uncertainty. This has made investors more risk-averse, contributing to the broad-based selloff.

3. Massive Foreign Capital Outflows

Foreign portfolio investors (FPIs) have been consistently pulling out funds from Indian equities. Since October 2024, FPIs have withdrawn approximately ₹2.5 lakh crore. In January 2025 alone, FPIs have offloaded over ₹69,000 crore in equities up to January 24.

Devang Kabra, Co-Fund Manager at Wallfort PMS, attributed this trend to several factors, including currency depreciation, rising crude oil prices, and the US Fed’s reluctance to cut interest rates. “FPIs are attracted to the 5.5% to 6% risk-free returns offered by US Treasury bonds, making Indian equities less appealing,” he said.

4. The US Fed Factor

The upcoming US Federal Open Market Committee (FOMC) meeting on January 28-29 is another source of market uncertainty. In 2024, the US Fed had cut interest rates by a full percentage point. However, experts believe the rate-cutting cycle has ended, with the Fed likely to maintain its current stance. This expectation is supported by strong US macroeconomic data and a cautious approach to policy changes.

5. Global Concerns Over US Tariff Policies

Global markets are also reacting to US President Donald Trump’s tariff policies. After imposing tariffs on Canada and Mexico, Trump recently threatened a 25% tariff on Colombia for its refusal to accept deported illegal immigrants. Although Colombia has reportedly agreed to accept deported migrants, uncertainty remains about Trump’s next moves.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “President Trump’s threats of tariffs on countries like China, Canada, and Mexico are causing jitters in global markets. Such policies could have cascading effects on global trade and economic stability.”

Market Outlook

The current market volatility underscores the importance of staying informed and cautious. Key events such as Budget 2025, US Fed policy decisions, and corporate earnings will likely shape market trends in the coming weeks. Experts recommend consulting certified financial advisors before making investment decisions to navigate this uncertain environment.

Disclaimer

The above views are based on analyses by individual experts and brokerage firms. Investors are advised to seek professional guidance before making investment decisions.