Stock Market Crash: Top factors that fuelled the bloodbath on Dalal Street on Tuesday;

SUMMARY

Benchmark SENSEX plunged 1,235 points to a seven-month low due to a global selloff sparked by US tariffs announced by President Trump. ICICI Bank and Reliance Industries were major losers.

Stock Market Crash: Top factors that fuelled the bloodbath on Dalal Street on Tuesday;

Stock market crash: The domestic equity market took a heavy beating on Tuesday, January 21. The selling was intense across the board.

At close, the S&P BSE SENSEX stood at 75,838.36, down 1,235.08 points, or 1.60%, while the NSE's NIFTY50 index settled at 23,024.65, down 320.10 points, or 1.37%.

The market breadth was in favour of declines, as out of 4,088 stocks traded on the BSE, 2,788 declined, and 1,187 gained, while 113 stocks remained unchanged.

Investor wealth dropped by ₹7.36 lakh crore as the m-cap of BSE-listed firms decreased from ₹431.59 lakh crore to ₹424.22 lakh crore.

In the broader market, the BSE MidCap index ended at 43,167.39, down 882.10 points, or 2%, while the BSE SmallCap index settled at 51,714.62, down 1,024.39 points, or 1.94%.

Sectorally, all the indices ended with deep cuts, with realty and consumer durable counters taking the biggest knock.

India VIX, the volatility index, gained nearly 4% to 17.06 levels.

Here is a list of factors that fuelled the bloodbath on Dalal Street on Tuesday;

Jitters among investors as Trump takes charge: Investors around the world took stock of US President Donald Trump, who soon after assuming office on Monday said his administration was mulling imposing 25% tariffs on Mexico and Canada as soon as February 1.

The market sentiment "remains fragile" on Trump's policy announcements, Reuters reported, quoting Satish Chandra Aluri, an analyst at Lemonn Markets Desk, as saying.

Trump's tariff decisions remain a wildcard for Indian markets, said another market analyst, adding that uncertainty over his tariff plans for India has led to caution among investors.

Disappointing Q3 numbers: Subdued earnings and cautious outlook and management commentaries by a host of companies dented investor sentiment. For instance, Zomato reported a sharp fall in its Q3 profit, and the company added that the intensifying competition in quick commerce has led to a pause in margin expansion in the business. Reacting to this, shares of the company as well as its rival Swiggy nosedived over 10%.

Besides, the earnings of large IT services companies (TCS, Infosys, HCLTech, Wipro, LTIMindtree, and TechMahindra) have not offered much to cheer about, which has again dampened sentiment.

Overseas investors continue to sell: Foreign investors have pulled out ₹50,912.60 crore from Indian equities this month, driven by the dollar's strength, rising bond yields in the US, and expectations of a weak earnings season.

The shift in sentiment comes amid global and domestic headwinds.

"The continued depreciation in the Indian rupee is exerting significant pressure on foreign investors, leading them to pull the money out of the Indian equity markets," Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Advisers India, said.

In addition, higher valuation of Indian equities, despite recent corrections, expectations of a rather weak earnings season, and uncertainty over the pace of economic growth are making investors wary, Srivastava added.

Nervousness ahead of Budget presentation: Market participants were nervous ahead of the Union Budget presentation, likely on February 1.

Some of the demands of the analysts from the Budget are increasing the minimum EPFO pension fivefold to ₹5,000 per month, enhancing the income tax exemption limit to ₹10 lakh annually, scrapping the new pension scheme, and unified pension scheme, reinstating the old pension scheme, and introducing an additional 2% tax on the super-rich to ensure social security for all informal work.

"We do not anticipate significant policy announcements in Budget 2025. Given the prevailing political stability, the budget will likely emphasize the government's dedication to fiscal discipline, aiming to meet its fiscal deficit targets. We expect sustained investments in infrastructure," said Anil Rego, founder and fund manager at Right Horizons PMS.