Sensex Nifty Stock Market Fall- Why Indian Stock Market Is Falling

Sensex Nifty Stock Market Fall- Sensex and Nifty Fall on Rising US Bond Yields: Key Reasons Behind the Market Decline

Sensex Nifty Stock Market Fall– The Indian stock market has experienced a significant downturn, falling for the third consecutive session on Friday, January 10. Both major indices—the Sensex and Nifty 50—saw losses, driven by weak global cues, rising US dollar strength, and increasing bond yields.

Sensex and Nifty 50 End the Day Lower

The Sensex opened at 77,682.59 but quickly dropped over 500 points, hitting an intraday low of 77,099.55, before eventually closing at 77,378.91, down 0.31%. The Nifty 50, which opened at 23,551.90, also saw a decline, falling to 23,344.35, losing 0.40% by the end of the day. The mid and small-cap segments were hit hardest, with the BSE Midcap index plunging 2.13% and the Smallcap index losing 2.40%.

This decline reflects a broader market trend over the last three sessions. In total, the Sensex has fallen by 1% and the Nifty 50 by 1.2%. Investors have seen significant losses, with the total market capitalization of BSE-listed companies dropping nearly ₹12 lakh crore, from ₹442 lakh crore on January 7 to below ₹430 lakh crore.

Why Is the Indian Stock Market Falling?

According to experts, several factors are contributing to the Indian stock market’s struggles. Atul Parakh, CEO of Bigul, mentions multiple interconnected reasons behind the fall, including foreign capital outflows, the emergence of the HMPV virus, and the depreciation of the Indian rupee against the US dollar. Moreover, weakness in Asian markets has compounded the negative outlook for Indian equities.

Key Factors Driving the Market Down

1. Q3 Earnings Results
   Traders and investors are treading cautiously ahead of the Q3 earnings season. Tata Consultancy Services (TCS), a major player in India’s IT sector, reported its Q3 earnings on January 9, which were in line with market expectations. While the IT sector appears resilient, the banking sector’s performance might be affected by the ongoing foreign institutional investor (FII) selling. According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, while banking majors may post good results, the FII outflows may dampen their response to these earnings.
2. Rising US Bond Yields and the Dollar
   US 10-year bond yields and the strength of the US dollar have been rising due to strong US economic data and reduced expectations of rate cuts by the US Federal Reserve in 2025. On January 10, US treasury yields hit near eight-month highs. This scenario is particularly negative for emerging markets like India, as higher bond yields and a stronger dollar often lead to capital outflows from these markets.
3. Heavy Selling by Foreign Portfolio Investors (FPIs)
   Foreign portfolio investors (FPIs) have been actively selling Indian equities, contributing to the market’s decline. By January 9, FPIs had sold Indian stocks worth over ₹19,000 crore. This trend may continue as uncertainties surrounding US President-elect Donald Trump’s trade policies and the Federal Reserve’s interest rate decisions persist. The concern over India’s economic growth slowing further has also added to the lack of risk appetite among investors.

According to the Ministry of Statistics & Programme Implementation (MoSPI), India’s GDP growth is expected to slow down to 6.4% in 2024-25, a four-year low. This weaker growth outlook is contributing to investor concerns and driving down the value of the Indian rupee.

4. Concerns Over India’s Economic Growth
   Reports suggest that India’s slowing GDP growth has raised concerns about potential downgrades. This weakening growth has led to a depreciating rupee and outflows of foreign capital. HSBC recently downgraded Indian equities from ‘neutral’ to ‘overweight,’ citing high valuations and slowing growth momentum as the main factors influencing this decision.
5. Uncertainty Around US Fed Policy and Trump’s Trade Policies
   The US Federal Reserve’s monetary policy and the potential impact of Donald Trump’s tariff strategies are also contributing to uncertainty. The US central bank’s reluctance to implement significant rate cuts this year, coupled with concerns about rising inflation, is a key worry for emerging markets like India. Furthermore, there is speculation about Trump’s protectionist trade policies, which could exacerbate inflation and make it harder for the Fed to control price rises.

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.