
The stock market took a major hit today, with India’s two major equity indices, the BSE Sensex and Nifty50, falling significantly during intraday trade on Monday. BSE Sensex dipped below 78,000, while Nifty50 dropped below 22,900. By 11:35 AM, BSE Sensex was at 75,579.63, marking a decline of 611.90 points or 0.80%. Similarly, Nifty50 stood at 22,303.05, down by 199 points or 0.86%.
Factors Contributing to the Weakness in the Market
For the second consecutive day, the Indian stock market continued its downward trajectory, influenced by a combination of factors including poor corporate performance, concerns surrounding US trade policies, and persistent foreign selling. The market capitalization of BSE-listed companies stood at Rs 410.03 lakh crore, showing a decline of Rs 9.48 lakh crore.
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Trump’s Proposal and Global Market Impact
The triggering point for the market’s collapse is a proposal by President Trump to impose a 25% tariff on Colombia, citing their refusal to accept deported migrants. Although Colombia later agreed to take back the deportees under normal conditions, the looming threat of additional tariffs on Canada and Mexico, effective February 1, created a ripple effect across global markets.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, in a YouTube video explained: “The main worry is that suddenly new threats are being levied by the United States, like the 25% tariff on Colombia for refusing to take back the illegal deportees. And the market knows now that there could be even further tariffs on Canada and Mexico.” This uncertainty has contributed to the overall weakness in global financial markets.
Federal Reserve’s Upcoming Decision
This week, all eyes are on the US Federal Reserve, with Wednesday’s decision on key interest rates set to play a pivotal role in the market’s trajectory. While analysts predict a potential lag in rate hikes, the language used in the Fed’s outlook for future rates will be closely scrutinized, especially in light of President Trump’s calls for lower interest rates.
Poor Corporate Earnings and Sectoral Disappointments
On the corporate front, the current earnings season is marked by moderate growth. According to Bloomberg’s estimates, Nifty50 companies are expected to see a 3% year-on-year earnings per share (EPS) growth in Q3. While some sectors, including capital goods, healthcare, and telecom, show promise with high double-digit profit after tax (PAT) growth, others, like metals, chemicals, and banking, are underperforming.
Foreign Institutional Investors (FII) Selling Pressure
Foreign Institutional Investors (FIIs) have remained largely negative, with Rs 64,156 crore worth of equities sold on January 24, 2025. This persistent selling pressure is another contributing factor to the market’s decline.
Currency Movements Amid Uncertainty
The uncertainty surrounding US tariffs has strengthened the US dollar, which rose by 0.21% to reach 107.66. However, Nomura strategist Naka Matsuzawa in a press conference suggests that this strength could be short-lived, stating, “As a trend, Trump is adopting a more realistic and less aggressive stance on tariffs.”
The current market instability is primarily driven by geopolitical tensions, US trade policies, and sluggish corporate performance. Investors remain cautious, as the outcome of US Federal Reserve’s decision and the ongoing developments around trade tariffs could shape the near future of global markets.