The Indian equity markets faced a major downturn on Tuesday, with the BSE Sensex crashing by over 1,300 points during intraday trade and closing at 75,838.36, down 1,235 points or 1.60%. Similarly, the Nifty50 briefly fell below the 23,000 mark, ending the day at 23,045.30, down 299 points or 1.28%.
Key constituents like Reliance Industries, ICICI Bank, and Zomato witnessed significant losses, further contributing to the sell-off. The market capitalization of BSE-listed firms plunged by ₹7.48 lakh crore, now standing at ₹424.11 lakh crore.
Reasons Behind the Stock Market Crash
- Market Uncertainty Due to U.S. Trade Policies
Investor confidence was rattled following U.S. President Donald Trump’s announcement of new trade tariffs on neighboring countries. Trump’s administration proposed a 25% tariff on imports from Mexico and Canada, effective February 1, 2025. This move heightened concerns over global inflation, a potential U.S. economic slowdown, and dollar appreciation, leading to adverse market sentiment. - Major Losses in Zomato and Other Stocks
Zomato’s shares plunged over 11%, contributing 150 points to the Sensex decline, after the company reported a 57% year-on-year drop in December quarter net profit. Other heavyweight stocks, including Reliance Industries, ICICI Bank, SBI, and M&M, accounted for an additional 490 points of the Sensex’s fall. - Weak Corporate Earnings
The Nifty50 is projected to show only 3% year-over-year EPS growth for Q3, with underperformance expected in sectors like metals, chemicals, consumer staples, and oil & gas. While sectors such as capital goods, healthcare, and telecom are expected to deliver strong results, overall corporate earnings have been disappointing, with stagnant profits reported so far. - Decline in Realty and Consumer Durables Stocks
- The Nifty Consumer Durables Index dropped 4%, driven by Dixon Technologies, which fell nearly 14% after Q3 results. Jefferies maintained an ‘Underperform’ rating on the stock with a price target of ₹12,600, citing valuation concerns.
- The Nifty Realty Index slipped 4.12%, with leading losses from Oberoi Realty, Lodha, and Prestige Estates Projects.
- Foreign Investment Outflow
Sustained selling by foreign institutional investors (FIIs) continues to pressure the market. FIIs have withdrawn ₹48,023 crore from equities as of January 20, 2025, with no signs of easing their outflows.
Market Outlook
The Indian stock market remains volatile amidst global economic uncertainties and disappointing corporate earnings. Key sectors, including banking, realty, and consumer durables, are expected to remain under pressure, while foreign investment trends will play a critical role in shaping market movements.
