The Indian stock market faced a massive downturn on Monday, February 3, as the Sensex crashed 700 points and the Nifty 50 dipped below the 23,250 mark. Weak global cues and growing economic concerns contributed to this sharp decline, leading to investors losing a staggering ₹5 lakh crore. Let’s break down the factors behind this dramatic fall and what lies ahead for the market.
Sensex Crashes 700 Points: What Happened?
The Sensex opened at 77,063.94 compared to its previous close of 77,505.96. It soon slipped over 700 points to touch 76,791.09. Similarly, the Nifty 50 opened at 23,319.35 but plunged by a percent to settle at 23,246.55.
Key Market Metrics
Index | Opening Level | Previous Close | Current Level |
---|---|---|---|
Sensex | 77,063.94 | 77,505.96 | 76,791.09 |
Nifty 50 | 23,319.35 | 23,482.15 | 23,246.55 |
The selloff was even sharper in the mid and small-cap segments, with the BSE Midcap and Smallcap indices plunging over 1% each.
Sensex Crashes 700 Points; Investors Lose ₹5 Lakh Crore
By 11:15 AM, the Sensex was down 418 points, or 0.54%, below the crucial 77,100 level. The Nifty 50 mirrored the trend, dropping by 160 points, or 0.64%, to reach 23,337.
The overall market capitalization of BSE-listed firms nosedived to ₹419 lakh crore from ₹424 lakh crore in the previous session, leading to investor losses amounting to a whopping ₹5 lakh crore.
Why Is the Indian Stock Market Falling Today?
Several factors have contributed to this steep decline. Let’s take a closer look at the primary reasons:
1. Weak Global Cues
The Indian stock market reacted negatively to weak global cues. Major Asian markets faced significant losses after U.S. President Donald Trump announced tariffs on Canada, Mexico, and China.
“Despite an excellent budget, the market will be under pressure from the Trump tariffs and the heightened global uncertainty that these ‘initial rounds of tariffs’ have triggered,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Trump Tariff Hits Market Sentiment
Trump’s tariff policy has raised concerns about a potential trade war that could derail global economic growth. Canada and Mexico were slapped with 25% duties, while China faced a 10% tariff.
“Trump may use tariffs against other countries again on non-trade issues,” remarked Vijayakumar.
3. Sharp Jump in Dollar Index; Rupee Hits Record Low
The Indian rupee hit a record low, breaching 87 per U.S. dollar for the first time. The dollar index surged to 109.6, prompting FIIs to pull out funds from Indian markets.
“The spike in the dollar index will trigger more selling by FIIs, putting the market under pressure,” noted Vijayakumar.
4. Caution Ahead of RBI MPC
Investors are treading cautiously ahead of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting. While the Finance Minister announced tax reliefs in the recent budget, market participants are hoping for a 25 basis points rate cut by the RBI.
5. Unabated Foreign Capital Outflow
Relentless selling by foreign institutional investors (FIIs) has been a major factor behind the market downturn. Since October, FIIs have offloaded nearly ₹2.7 lakh crore worth of Indian equities, dragging down market sentiment.
What Lies Ahead for Investors?
The Indian stock market’s future largely depends on global economic stability, RBI’s monetary decisions, and the resolution of the ongoing trade tensions. Analysts recommend caution and suggest diversifying portfolios to mitigate risks.
FAQs
1. What caused the Sensex to crash by 700 points?
The crash was triggered by weak global cues, Trump’s tariff announcements, a strong dollar, and sustained FII outflows.
2. How much wealth did investors lose today?
Investors lost approximately ₹5 lakh crore as the overall market capitalization of BSE-listed firms dropped.
3. What impact did Trump’s tariffs have on global markets?
Trump’s tariffs raised concerns about a trade war, leading to significant losses in major Asian markets.
4. What is the outlook for the Indian stock market?
The market’s future depends on RBI’s monetary policy decisions, global economic conditions, and trade negotiations.
5. How can investors protect their portfolios in such market conditions?
Experts recommend diversifying investments, focusing on defensive stocks, and maintaining a long-term investment approach.
6. Is the rupee likely to recover soon?
The rupee’s recovery depends on global economic stability and RBI’s interventions.
Conclusion
The Sensex crash of 700 points and the subsequent loss of ₹5 lakh crore serve as a stark reminder of the market’s volatility. While global factors continue to exert pressure, investors must stay informed and make prudent investment decisions. Keep an eye on upcoming RBI announcements and geopolitical developments to navigate these turbulent times.
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius