Sensex Crashes 700 Points, Nifty Below 23,250: Key Reasons Behind the Market Fall

The Indian stock market witnessed a sharp decline in early trade on Monday, February 3, with the Sensex tumbling over 700 points and the Nifty 50 slipping below 23,250. Investors saw a massive ₹5 lakh crore eroded from the market within just five minutes of trading.

Weak global cues, a steep fall in the rupee, and foreign investor selloffs were the major reasons behind this sudden drop. The selloff was more pronounced in mid and small-cap stocks, with both segments losing over 1% each.

Let’s take a closer look at what led to this steep market correction today.

Stock Market Opening and Early Trends

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The Sensex opened at 77,063.94 against its previous close of 77,505.96 but quickly slipped over 700 points to touch 76,791.09. Meanwhile, the Nifty 50 started the session at 23,319.35 but soon plunged by 1% to 23,246.55.
By 10:17 AM, the Sensex was trading 690 points (0.89%) lower at 76,815, while the Nifty 50 was down 238 points (1.02%) at 23,243.

The selloff wiped out ₹5 lakh crore in market capitalization, bringing the total value of BSE-listed firms down to approximately ₹419 lakh crore from ₹424 lakh crore in the previous session.

Why is the Indian Stock Market Falling Today?

Several factors contributed to today’s market downturn, ranging from global concerns to domestic economic pressures.

1. Weak Global Cues - The global market downturn played a crucial role in dragging Indian equities lower. Major Asian indices slumped on Monday. Japan’s Nikkei and South Korea’s KOSPI lost nearly 3% each, after an unexpected announcement by US President Donald Trump regarding fresh tariffs on key trading partners.
2. Trump’s Tariff Shock - The US government imposed hefty tariffs, 25% on Canada and Mexico and 10% on imports from China. This sparked fears of a full-fledged trade war, which could negatively impact global economic growth. 
3. Rupee Hits Record Low - The Indian rupee tumbled to an all-time low, breaching 87 per US dollar. A stronger dollar and rising uncertainty around global trade policies put additional pressure on emerging market currencies, including the rupee.
4. Caution Ahead of RBI’s Monetary Policy Decision - With the Union Budget now behind, investor focus has shifted to the Reserve Bank of India’s (RBI) upcoming Monetary Policy Committee (MPC) meeting. Market participants are eagerly awaiting the central bank’s decision on interest rates, which could influence market sentiment in the coming days.
5. Foreign Institutional Investors (FIIs) Continue Selling - Foreign investors have been exiting Indian markets since October 2024, putting immense selling pressure on equities. Between October 1, 2024, and February 1, 2025, FIIs have sold stocks worth ₹2.7 lakh crore.

Weak corporate earnings, high valuations, and rising US bond yields have made Indian equities less attractive to foreign investors, further accelerating the selloff.

Conclusion

The sharp decline in the Sensex and Nifty today highlights growing investor concerns about global trade uncertainties, a weakening rupee, and continued FII outflows. While it is believed that the market may remain volatile in the short term, all eyes are now on the RBI’s policy decision, which could provide much-needed relief. Until then, investors should monitor key economic triggers closely.