Sensex plunges over 1,000 points: What's behind today's market crash
What's the story
The Indian stock market witnessed a major bloodbath today, with the Sensex and Nifty plunging by over 1.3%. This is the fifth consecutive session of losses for the two benchmarks.
At the time of writing, Sensex was down over 1,000 points to trade at 76,259.
The fall was mainly led by rising US trade tensions, continued foreign fund outflows, and disappointing corporate earnings.
The broader market was even more affected with midcap and smallcap indices crashing up to 3.5% each.
Tariff impact
Trump's tariff hike triggers global economic concerns
The current market slump can largely be blamed on US President Donald Trump's decision to hike tariffs on steel and aluminum imports. The move has revived fears of a wider trade war.
On February 10, Trump signed executive orders increasing aluminum tariffs from 10% to 25%, and reimposing a 25% tariff on previously duty-free steel imports.
Ending exemptions for key trading partners like Canada, Mexico, and Brazil has heightened global economic growth concerns.
Currency pressure
Rupee's weakness and FII selling exacerbate market woes
The Indian rupee's continued depreciation has added to market woes, hitting a record low of 88 per US dollar intraday on Monday.
Sandip Agarwal, Fund Manager and co-Founder at Sowilo Investment Managers LLP, explained the market decline is mainly due to rupee's depreciation.
He noted when rupee weakens, FII selling intensifies as their real returns diminish.
Despite today's slight recovery in the rupee, the broader trend remains weak with nearly $9 billion of outflows from Indian equities this year.
Earnings impact
Disappointing Q3 earnings and global market pressure
The underwhelming Q3 earnings have also affected investor sentiment. Shares of Eicher Motors and Escorts Kubota fell by 7% and 5.3% respectively, after both companies reported lower-than-expected profits for Q3 FY25.
Globally, equities are feeling the heat as investor caution rises due to Trump's tariff escalation.
Asian markets were in the red with Hong Kong's Hang Seng falling by 0.3%, while S&P 500 futures dropped by 0.2%.
Valuation worries
Valuation concerns in midcap and smallcap segments
Continued valuation concerns in the midcap and smallcap segments have also added to the negative market sentiment.
S Naren, CIO of ICICI Prudential AMC, recently warned investors about "absurd" valuations in these segments, advising them to exit small- and mid-cap stocks entirely.
His comments have sparked debates across the mutual fund industry, amplifying the bearish tone in the broader market.