The stock markets witnessed a sharp decline on Monday, with both the Sensex and Nifty falling nearly 1% as investor sentiment took a hit due to global trade concerns and a weakening rupee. The downturn led to a massive loss of ₹6 lakh crore in investor wealth, as market bears took control of Dalal Street. The BSE Sensex dropped 548.79 points to close at 77,311.80, while the NSE Nifty50 lost 178.35 points to settle at 23,381.60. At one point during the day, the Sensex was down over 700 points, while the Nifty50 had slipped over 225 points.
The market's slide was primarily triggered by U.S. President Donald Trump's latest threat to impose a fresh round of tariffs on steel and aluminium imports, which intensified concerns over global trade disruptions. Metal stocks bore the brunt of the selloff, with the Nifty Metal index plunging 2.6%. Shares of Tata Steel fell 3.1%, while other major players like JSW Steel, Hindalco Industries, and Vedanta also declined sharply. Analysts believe Trump's tariff announcement could lead to an oversupply of metals in other markets, thereby depressing base metal prices and further weighing on the already struggling sector.
Adding to the market's woes, the rupee fell to an all-time low of 87.95 per U.S. dollar in early trade before stabilizing slightly at 87.93, down 0.6% for the day. A weaker rupee increases import costs and negatively impacts companies with high foreign debt, making investors more cautious. Analysts warned that the currency’s depreciation, coupled with continued foreign investor outflows, could put further pressure on equities.
Foreign investors have been consistently selling their holdings, despite recent measures by the Reserve Bank of India (RBI) to support the economy. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, pointed out that despite the RBI’s recent 25 basis point rate cut and tax-saving initiatives in the Union Budget, foreign investors remain net sellers due to global uncertainties and higher yields in U.S. bonds. The 10-year U.S. Treasury yield hovering above 4.4% and the U.S. dollar index crossing 108 indicate sustained risk aversion among global investors, leading to outflows from emerging markets like India.
The broader markets also saw heavy selling, with the Nifty Midcap 100 and Smallcap 100 indices tumbling 2.1% each. Market experts believe the sharp selloff in midcap and smallcap stocks is due to high valuations and concerns over earnings growth. Key large-cap stocks such as HDFC Bank and Reliance Industries declined 1% each, contributing to the overall market weakness.
All 13 major sectors ended in the red, with banking, FMCG, and IT stocks facing significant pressure. Banking stocks saw profit booking, with HDFC Bank and ICICI Bank slipping 1% each. FMCG stocks struggled due to ongoing concerns over weak rural demand, while IT stocks remained under pressure amid global economic uncertainty and currency volatility.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that despite the BJP’s strong performance in the Delhi elections, the market is unlikely to see a sustained rally in the near term. He emphasized that the combination of a high dollar index, rising U.S. bond yields, and continued foreign investor selling will limit any major gains in the stock market.
With the Sensex and Nifty already correcting by 10-11% from their all-time highs and the BSE Midcap and Smallcap indices falling 15% from their 52-week highs, analysts believe that further downside cannot be ruled out. Some individual stocks have lost as much as 50% from their peak values.
According to VLA Ambala, Co-Founder of Stock Market Today, the Indian economy could remain in a bear phase for an extended period due to factors such as slower GDP growth, a depreciating rupee, continued tariff threats, weak domestic demand, costlier imports, and a widening trade deficit. She predicted that Nifty could find support between 23,200 and 23,050, with resistance expected between 23,410 and 23,480 in the next session.
Despite concerns, analysts at Motilal Oswal Financial Services (MOFSL) believe that the BJP’s recent win in Delhi could provide some confidence to the market. They noted that with the Union Budget behind and the RBI taking steps to ease liquidity, market sentiment might improve slightly. However, they warned that global factors, such as Trump's trade policies and foreign investor outflows, could continue to create uncertainty.
Market experts recommend that investors focus on high-quality large-cap stocks that are fairly valued, as they are expected to remain relatively stable in the current market environment. Until there is clarity on global trade developments, foreign investor flows, and domestic economic growth, the market is likely to remain volatile with a limited upside potential.
