Sensex Crashes Over 1,000 Points: Why Markets Fell Today

On Tuesday at 3:30 PM, the BSE Sensex had fallen by 1065.71 points to 82,180.47, and the NSE Nifty 50 had fallen by 353 points to 25,232.50. Both are down by more than 1% at the end of today's trading session because of broad global and domestic pressures.  There was heavy selling activity by foreign portfolio investors and concerns over trade, which has caused investors to remain cautious regarding the current state of the overall market.

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IT Stocks Drag Benchmarks Lower

Information Technology stocks were hit hardest by the declines in the stock market, with every component in the Nifty IT index being in negative territory. The largest faller in the Nifty IT index was LTIMindtree with a decline of 6.5%, followed by Mphasis, Wipro, Tech Mahindra and Coforge.

A combination of negative global market signals, concerns over clients reducing expenditures, and uncertainty regarding trade policies has negatively affected the IT Sector; in a similar way, TCS, Infosys, HCLTech, and Persistent Systems are also being affected. The decline in the IT Sector has compounded the loss in the broader market.

Global Trade Tensions Fuel Caution

First, consider that there is still uncertainty surrounding U.S.-European frictions regarding Greenland tariffs, and therefore, this uncertainty is creating volatility in the markets, with investors waiting for further updates regarding the situation, as well as possible rulings from the U.S. Supreme Court regarding some Trump-era tariff decisions.
Additionally, even though U.S.-India negotiations regarding an FTA have been ongoing, no agreement has yet been reached. As such, this uncertainty will continue to negatively impact investor risk appetite, causing more risk-averse behaviour amongst investors. The uncertainty will persist until there are resolutions to these situations.

FPI Selling and Broader Trends

In January, Foreign Institutional Investors (FIIs) sold shares in companies listed on Indian exchanges to the value of ₹29,315 crore. Because FIIs sold more shares than local funds purchased, FIIs have an overall influence of downward price pressure on the markets.

In terms of the greater marketplace in India. The markets did not show consistent indicators; primitive sectors like midcaps and small caps indices have increased. Auto and PSU Banks have also increased, but the Financial Services, FMCG, Media, Metals, Pharmaceuticals, Private Banks, Real Estate, Health Care, Consumer Durables and Oil and Gas have all decreased.

The India VIX decreased, showing a reduction in fear in the market, but overall market indexes have still been stressed in relation to one another, causing market participants to continue monitoring developments regarding trade and fund flows.