![]() |
|
The Indian equity market experienced a significant downturn on Monday, with the BSE Sensex and NSE Nifty indices falling by over 1% each. This sharp decline resulted in a loss of approximately Rs 10.5 lakh crore for investors, underscoring the severity of the bearish trend. The broader market witnessed even steeper falls, with the NIFTY Midcap 100 index dropping by 2.75% and the smallcap index declining by nearly 4%. This widespread selling pressure across various market segments highlights a concerning trend of investor sentiment.
Several factors contributed to this market slump. Weak global cues played a significant role, primarily stemming from uncertainty surrounding US trade policy under the new president. The Nasdaq, a tech-heavy index, faced pressure ahead of the earnings season, further exacerbating anxieties. The launch of a free, open-source AI model by a Chinese startup added to the concerns, as investors perceived it as a potential threat to major US tech companies. This global instability directly impacted the Indian market, leading to a significant sell-off.
Adding to the downward pressure was the continued exit of Foreign Institutional Investors (FIIs) from the Indian market. FIIs have been on a selling spree since October of last year, and their offloading of over Rs 69,000 crore in Indian equities in January alone significantly contributed to the market's decline. This outflow reflects a broader trend of reduced investor confidence in the Indian economy, potentially due to factors such as moderation in economic growth and the depreciation of the Indian Rupee (INR). The disappointing Q3FY25 corporate earnings, falling short of market expectations, further dampened investor sentiment.
Experts attribute the market's weakness to a combination of these factors. Vinod Nair, Head of Research at Geojit Financial Services, highlighted the broad-based selling across sectors, tepid earnings, and weak global sentiment. He emphasized that the expensive valuations of mid and small-cap stocks made them particularly vulnerable to the downturn. The ongoing US trade confrontations, such as the recent one with Colombia, added to the overall negative sentiment. The heightened volatility is expected to persist this week, as investors await crucial events including the FOMC meeting, expiry week, and the Union Budget.
From a technical perspective, analysts point to bearish signals in the market. Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates Ltd., noted the formation of a bearish red candle on the daily chart, indicating weakness. While the Nifty managed to hold above a crucial support level, a sustained breakdown could trigger further declines. This technical analysis underscores the potential for continued market volatility in the short term.
Investors are now closely watching two major events that could significantly impact the market: the Union Budget 2025 and the FOMC meeting. Deepak Ramaraju, Senior Fund Manager at Shriram AMC, expressed concerns that a populist budget could strain the fiscal deficit, weakening the rupee and potentially delaying economic growth through reduced rate cuts. He warned that any shortfall in fiscal prudence or lower-than-expected growth guidance could trigger further market selloffs. The FOMC meeting, scheduled for January 28-29, will also be closely scrutinized for indications of the Fed's stance on interest rate cuts, which could have significant implications for global markets and consequently, the Indian market.
The current market situation underscores the interconnectedness of global and domestic factors influencing investor sentiment and market performance. The confluence of weak global cues, FII selling, disappointing earnings, and upcoming significant economic events has created an environment of uncertainty and volatility. The coming days will be critical in determining whether the market can recover from this substantial loss or whether further declines are imminent. The response of investors to the upcoming budget and the FOMC’s decisions will be key determinants in shaping the market’s trajectory in the near future.
Source: Rs 10 lakh crore wiped out as bloodbath in the equity market continues