Sensex Nifty Stock Market- Indian Stock Market Faces Major Drop: 5 Reasons Behind the Decline

Sensex Nifty Stock Market- Why the Indian Stock Market is Struggling: Key Factors Explained

Sensex Nifty Stock Market– The Indian stock market took a significant hit on Monday, February 24, with the Sensex crashing by over 800 points, marking its fifth consecutive session of losses. The Nifty 50 followed suit, also experiencing a sharp drop. Several factors have contributed to this market downturn, and experts warn that the market could continue to face pressure if global uncertainties persist.

Sensex and Nifty 50 Performance

The Sensex opened at 74,893.45, lower than its previous close of 75,311.06. It witnessed a dramatic drop of 924 points, eventually closing 857 points (1.14%) lower at 74,454.41. Similarly, the Nifty 50 opened at 22,609.35, fell by 1.2%, and ended 243 points (1.06%) down at 22,553.35. This widespread sell-off was reflected across various sectors, including BSE Midcap and BSE Smallcap indices, which dropped by 0.78% and 1.31%, respectively.

Key Reasons Behind the Market Decline

1. Concerns Over a Trade War One of the key factors weighing on the Indian stock market is the growing concern over a potential trade war. US President Donald Trump’s tariff policies have raised fears of a global economic slowdown. Experts warn that a trade war between the US and other major economies could significantly hinder global economic growth, which is already facing challenges due to inflation and slowing growth.
2. Foreign Portfolio Investors (FPI) Selling The relentless selling by foreign portfolio investors has been another major factor contributing to the market’s woes. Since October 2024, FPIs have been consistently offloading Indian equities, amounting to nearly ₹37,000 crore in February alone. Data indicates that the total value of FPI sales since October 2024 exceeds ₹3 lakh crore. Analysts like V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, point out that FPI selling, coupled with global uncertainties, has put immense pressure on the Indian market.
3. Chinese Stock Market Surge The Chinese stock market’s recent performance has also contributed to the outflow of capital from India. As Chinese stocks have gained in value, Indian stocks, still facing high valuations, have seen a flow of investments into the Chinese market. Chinese government measures to support its stock market and economy have strengthened the outlook for China, causing investors to seek opportunities there instead of in India.
4. Macroeconomic Challenges in India Macroeconomic data indicates that India’s economic growth may be slowing down, which has hurt investor sentiment. While India’s resilience in growth helped propel the stock market to record highs in the past, revised estimates and recent data suggest that the country is now experiencing a deceleration. This slowdown has led to an increased caution among investors, further contributing to the market’s weakness.
5. Inflation and Growth Concerns in the US Another factor affecting global markets, including India, is the economic situation in the United States. Recent data reveals persistent inflation in the US, alongside a weakening economy. This combination of stubborn inflation and slowing growth has raised concerns globally. In February, the S&P Global US Composite PMI Output Index, which tracks manufacturing and services, fell to its lowest reading since September 2023. At the same time, the US Consumer Price Index (CPI) rose by 0.5% to 3% in January, adding to the inflationary pressure.

Market Outlook: Will There Be a Recovery?

Given the multitude of challenges, the Indian stock market faces uncertain times ahead. The selling pressure from FPIs, concerns about a global trade war, and local economic slowdown are likely to keep the market under stress. However, if global conditions stabilize and domestic growth picks up, there could be a chance for recovery.

For investors, the current market downturn could present opportunities to buy at lower levels, but it is crucial to exercise caution. Investors should keep an eye on upcoming economic data, global developments, and any potential policy measures that could either mitigate or exacerbate the current challenges.

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.