Why Stock Market Is Falling Today In India- Why the Indian Stock Market is Facing a Major Downturn
Why Stock Market Is Falling Today In India– The Indian stock market has been grappling with significant selling pressure, marked by foreign capital outflows, weak earnings reports, a slowing economy, and a steep decline in the Indian rupee against the US dollar. The market benchmark Sensex has experienced a sharp drop of nearly 2,300 points over the past five days, while the Nifty 50 index has fallen below the 23,000 mark.
February 11 Stock Performance: Sensex and Nifty 50’s Steep Decline
On February 11, the Sensex opened at 77,384.98 and quickly dropped by 1,281 points to 76,030.59. Similarly, the Nifty 50 opened at 23,383.55 and fell 395 points, or 1.7%, to close at 22,986.65. By the end of the trading session, the Sensex had dropped 1,018 points (1.32%), settling at 76,293.60, and the Nifty 50 closed 310 points lower (1.32%) at 23,071.80.
Market Capitalization Decline: Investors Face Major Losses
The cumulative market capitalization of BSE-listed firms has taken a hit, dropping by ₹18 lakh crore over the last five days. As of February 11, the total market capitalization stands at approximately ₹408 lakh crore, down from ₹426 lakh crore on February 4, when the Sensex had closed on a positive note.
Sectoral Performance: Broad-based Losses Across Sectors
On February 11, all major sectoral indices ended in the red, with the Nifty Realty, Healthcare, Pharma, Consumer Durables, PSU Bank, Auto, and FMCG indices all witnessing declines of 2-3%. The Nifty Bank and Financial Services indices also dropped over 1%, adding to the overall market weakness.
Why Is the Indian Stock Market Declining?
According to market experts, the recent downturn in the Indian stock market can be attributed to five key factors:
1. Massive FPI Selling: A Key Driver of the Downturn
Foreign institutional investors (FIIs) have been a significant force in the selling pressure. Since October 2024, foreign investors have pulled over ₹2.75 lakh crore from the Indian stock market, with ₹12,643 crore in stock sales recorded in just the cash segment by February 10. This mass exodus from the market is largely driven by rising US bond yields, a stronger dollar, and fading hopes of a Federal Reserve rate cut anytime soon.
2. Weak Q3 Earnings Reports: Disappointing Results from Indian Inc.
India Inc.’s earnings for the December quarter (Q3) have been marginally better than previous quarters but have still failed to meet market expectations. As Pramod Gubbi, co-founder of Marcellus Investment Managers, stated, “Q3 earnings have been marginally better than the last two quarters, which were marred by a significant decline in govt capex, elections, and weather. However, compared to expectations as indicated by valuations, earnings continue to disappoint.” Consumer staples, autos, and building materials, in particular, have been notable underperformers.
3. Rupee Weakness: A Key Factor in Market Sentiment
The Indian rupee has been weakening steadily against the US dollar, falling to its lowest levels in recent months. As of February 10, the rupee had dropped nearly 3% against the dollar this year, hitting the 88-level. Analysts believe that the rupee’s decline is partly due to the US dollar’s rise amid concerns over a potential trade war. On February 11, however, the rupee gained some ground, rising by 61 paise to 86.84 against the dollar, following speculations of intervention by the Reserve Bank of India.
4. Stretched Valuations: Concerns Over Market Overvaluation
Despite the recent market correction, experts remain concerned about the high valuations in the Indian stock market. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that while large-cap valuations have become more reasonable due to FIIs’ continued selling, mid and small-cap stocks remain overvalued. “Valuations remain elevated, and earnings aren’t likely to recover anytime soon,” said Pramod Gubbi. According to renowned valuation expert Aswath Damodaran, the Indian stock market is currently the most expensive equity market globally.
5. Trade War Fears: US Tariffs Escalate Global Uncertainty
Concerns over a potential global trade war have added to investor anxiety. On February 10, US President Donald Trump imposed a 25% tariff on steel and aluminum imports, which has led to growing fears about escalating trade tensions between the US and its global trade partners. The uncertainty surrounding these tariffs, combined with concerns about the global economic impact, has left investors cautious about taking on risky equity positions.
The Road Ahead: A Volatile Period for the Indian Stock Market
As the Indian stock market struggles with these significant headwinds, analysts predict a volatile period ahead. Varun Fatehpuria, Founder & CEO of Daulat Finvest Private Limited, commented, “What is different with the current US administration is the absence of policy certainty. And that is the risk that investors will have to live with. The next 4 years are going to be a volatile but exciting time for public market investors.”
In the face of these challenges, investors are advised to remain cautious and conduct thorough research before making any investment decisions. While the market may see some relief in the future, the ongoing risks make it essential to monitor economic, political, and market developments closely.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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