Stock Market: 5 Reasons Behind the Fall of Sensex and Nifty, Rs 26 Lakh Cr Market Cap Lost in 6 Days

Stock Market: 5 Reasons Behind the Fall of Sensex and Nifty, Rs 26 Lakh Cr Market Cap Lost in 6 Days

Several large-cap stocks, including Asian Paints, Bank of Baroda, Canara Bank, Coal India, DLF, Hero MotoCorp, IOC, Jio Financial Services, PNB, REC, Reliance Industries, Tata Motors, and REC Ltd, reached their 52-week lows today.

Amit Mudgill Updated: February 12, 2025, 10:58 AM IST

The Indian stock market saw significant losses on Wednesday as the Sensex and Nifty extended the ongoing sell-off into the sixth consecutive session, resulting in a staggering Rs 26 lakh crore reduction in the BSE market capitalisation. Early trading saw the market value of all listed companies on the Bombay Stock Exchange (BSE) nearing a dip below the Rs 400 lakh crore mark.

Market observers pointed to several factors driving this downturn, including inflation concerns in the US, which have led to higher US treasury bond yields (4.55%) and a stronger dollar index. The situation has been exacerbated by President Donald Trump’s tariffs, particularly the 10% on Chinese goods, which Nomura analysts note has increased the average tariff rate on all goods entering the US to 3.7% from 2.3%.

Concerns are also growing about the Indian rupee potentially weakening further, leading to more foreign outflows, which have already reached Rs 88,000 crore in 2025. Foreign institutional investors (FIIs) were net sellers of Rs 4,486.41 crore in equities on Tuesday, according to provisional NSE data.

On Wednesday, the Sensex fell by 835.66 points (1.10%) to 75,457.94, while Nifty dropped 252.85 points (1.1%) to 22,818.95.

Trump's executive actions, including a potential 25% tariff on steel and aluminum imports, are also adding pressure, which could push the average tariff rate to 4.1%. Nomura has revised its expectations, anticipating the US Federal Reserve will hold interest rates steady through 2025 due to the impact of tariffs driving core inflation higher.

The stock market has been under pressure due to the combination of Trump’s tariffs and the Fed’s cautious stance. Trump’s move to impose tariffs not only on China but on all countries has worsened market sentiment. The European Union has already signaled it will retaliate with counter-tariffs, increasing the likelihood of a full-blown trade war.

VK Vijayakumar of Geojit Financial Services noted that Trump’s policies, while impactful, cannot override economic laws. “Higher tariffs are raising inflation in the US, and if the Fed responds with a hawkish stance, the US stock market will face pressure, which could, in turn, affect the global market,” he said. The volatility will likely continue until the economic impacts of the tariffs are fully realized.

Despite the market’s current weakness, Vijayakumar advised investors to consider shifting from mid and small-cap stocks, which remain overvalued, to large-cap stocks, which are more fairly valued. While a market rebound is expected, he warned that foreign institutional investors might sell into any rally, limiting potential upside.

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