Sensex Tanks Over 600 Points: Key Reasons Behind the Market Fall

The Indian stock market started the week on a sour note as the BSE Sensex plunged over 600 points and the NSE Nifty lost nearly 200 points in early trading on Monday. Despite the Reserve Bank of India's (RBI) recent rate cut and the Bharatiya Janata Party’s (BJP) electoral victory in Delhi, the markets continued to witness selling pressure. Let’s explore the three major factors driving this market slump.

1. Foreign Investors Selling Amid Weak Market Sentiment

One of the primary reasons behind the market decline is the continued selling pressure from foreign portfolio investors (FPIs). Market analysts suggest that despite the RBI’s monetary easing, foreign investors remain unconvinced about short-term market growth.

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, pointed out that foreign investors are offloading their holdings due to a lack of earnings traction in the Indian markets. He mentioned that while Nifty remains above the 23,000 mark, it still struggles with medium- to short-term uncertainties, adding further pressure to Indian equities.

2. Rupee Weakens to Record Low Against U.S. Dollar

Another contributing factor to the market decline is the rupee hitting an all-time low against the U.S. dollar. The Indian currency slipped to 87.95 per USD, surpassing its previous record low of 87.58 from last week. A weaker rupee increases import costs, particularly for crude oil, and impacts investor sentiment negatively.

Market traders believe that if this downward trend continues, the RBI may need to step in to stabilize the currency. Analysts also worry that a depreciating rupee could drive up inflation and further dampen economic growth.

3. Metal Stocks Hit Hard by U.S. Trade Tariffs

The stock market was further weighed down by a sharp selloff in metal stocks following an announcement by U.S. President Donald Trump regarding new tariffs on steel and aluminum imports. Trump stated that a 25% tariff would be imposed on these metals, raising concerns about global trade tensions and demand for Indian metal exports.

As a result, the Nifty Metal Index fell nearly 3%, with major companies like Vedanta Limited, Tata Steel, JSW Steel, and Steel Authority of India (SAIL) witnessing steep declines. The fear of reduced global demand and pricing pressure has led to a bearish outlook on the sector.

What’s Next for the Market?

Despite the BJP’s resounding victory in the Delhi elections, which was expected to bring some political stability, global factors and foreign investor behavior have overshadowed its impact. Analysts at Motilal Oswal Financial Services (MOFSL) suggest that while the election results may provide some confidence to domestic investors, market trends will now depend on corporate earnings, global economic developments, and trade policies.

Looking ahead, uncertainty over U.S. trade measures and foreign investor activity will likely continue to drive market volatility. Investors should keep an eye on key global events, corporate earnings reports, and central bank interventions to gauge the market's future trajectory.

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Reference from:https://www.indiatoday.in/business/story/dalal-street-sensex-tanks-over-600-points-3-reasons-why-the-stock-market-is-falling-today-rupee-metal-stocks-fii-2677420-2025-02-10