Stock market today: Sensex crashes 900 points, down for 4th straight day; 8 key factors behind bloodbath on D-Street

Stock market today: The Indian stock market continued reeling under sharp selloff across segments for the fourth consecutive session on Monday, January 13, amid rising crude oil prices, weakening rupee and massive foreign capital outflows.

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Sensex opened at 76,629.90 against its previous close of 77,378.91 and crashed over 950 points, or over 1 per cent, to an intraday low of 76,428.28. The Nifty 50 opened at 23,195.40 against its previous close of 23,431.50 and cracked over 320 points, or over 1 per cent, to the level of 23,109. The selloff was sharper in the mid and smallcap segments, a trend that has been seen off late. The BSE Midcap and Smallcap indices declined 4 per cent.

Around 2:10 PM, the Sensex was 925 points, or 1.20 per cent, down at 76,454, while the Nifty 50 was 319 points, or 136 per cent, down at 23,113.

The overall market capitalisation of BSE-listed firms dropped to nearly ₹418 lakh crore from ₹430 lakh crore in the previous session, making investors poorer by about ₹12 lakh crore in a day. In the last four sessions of trade, investors have lost about ₹24 lakh crore cumulatively.

Why is the Indian stock market falling?

Here are eight factors why the Indian stock market is falling:

1.Oil on boil

According to a Reuters report, oil prices hit their highest level in more than three months on Monday’s open. The rise in oil prices has been driven by expectations that the US sanctions will affect Russian crude supplies to the world’s top importers, China and India.

“The Biden administration on Friday imposed its broadest package of sanctions yet targeting Russia’s oil and gas revenues in an attempt to give Kyiv and the incoming administration of Donald Trump leverage to reach a deal for peace in Ukraine,” reported Reuters.

Rising crude oil prices negatively impact India’s fiscal health, as it is one of the largest importers of the commodity. At a time when inflation concerns persist, and economic growth shows signs of slowing down, a surge in crude oil prices delivers a fresh blow to investor sentiment. It may also exert additional pressure on the domestic currency and aggravate foreign capital outflows.

2. Rupee touches fresh lows

The Indian rupee crashed 23 paise to hit a lifetime low of 86.27 against the US dollar in early trade on Monday amid rising crude oil prices and elevated dollar. The US dollar held near 14-month peaks after a strong payrolls report on Friday.

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The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading up 0.22 per cent at over a two-year-high level of 109.72. The 10-year US bond yields remained elevated, touching its October 2023 level at 4.76 per cent, PTI reported.

3. Uncertainty surrounding Trump’s trade policies

Donald Trump will take office next Monday (January 20). Speculations are rife that he may propose higher tariffs on countries, including India, which could further deteriorate sentiment.

“A second Trump administration could significantly reshape Asia’s economic landscape, particularly through its trade policies and protectionism. A second Trump term could offer new opportunities for Southeast Asia and emerging markets but create risks for export-driven economies and industries reliant on international talent,” said Ross Maxwell, Global Strategy Operations Lead at VT Markets.

4. Massive selling by FPI

In the current month, foreign portfolio investors (FPIs) have sold off Indian equities worth over ₹21,350 crore till January 10, after a ₹16,982 crore selloff in December. They have been in sell mode since October last year. In October, they sold Indian stock worth ₹1,14,445 crore, and in November, they took away ₹45,974 crore from the Indian stock market.

Rising US bond yields and the US dollar, diminishing expectations of the US Fed rate cut this year and stretched valuation of the Indian equities amid disappointing quarterly earnings have driven the sharp selloff by foreign investors.

5. Caution ahead of Budget 2025

Amid market volatility, all eyes are on the Union Budget 2025. Experts expect the government to maintain fiscal prudence and announce measures to boost consumption and support growth. Experts warn that if the Budget remains populist, like the last one, it may disappoint the market and may cause further downtrends.

“After a populist budget last year, we do not expect a very hefty pre-budget rally this year. Since the last budget was a populist budget after the BJP regained power for the third time in general elections conducted last year, we expect the Union Budget 2025 to bring a little break for the middle class comparatively, considering the low level of consumption trends this year, especially the rural demand,” Divam Sharma, co-founder and fund manager at Green Portfolio, told Mint.

6. Diminishing hopes of US Fed rate cuts

Given strong US macroeconomic data and concerns that Trump’s trade policies could fuel inflation, hopes for a US Federal Reserve rate cut in 2025 remain slim at this point.

The start of the US Fed rate cut cycle was the primary reason which boosted emerging markets like India to fresh record highs last year in September. The minutes of the last policy meeting of the US Fed indicated that policymakers remain cautious about the trajectory of inflation in the world’s largest economy.

According to Reuters, US job growth unexpectedly accelerated in December. Nonfarm payrolls increased by 2,56,000 jobs last month, the most since March, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls advancing by 1,60,000 jobs, with estimates ranging from 1,20,000 to 2,00,000.

7. Apprehensions of soft Q3 earnings

Following a lacklustre Q1 and Q2 earnings season, experts anticipate only a modest recovery in select sectors. They predict a substantial rebound will likely occur only by Q4, suggesting that market pressure may persist for an extended period.

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“Q3 is also going to be mainly subdued. Some improvements could occur in some pockets, but an outright reversal is unlikely. Significant improvements could be seen from Q4 onwards,” said Ajit Mishra, SVP of research at Religare Broking.

“Q1 and Q2 showed muted performance, and we worry that Q3 will be a hattrick. We feel export-oriented sectors will do much better due to the weakening rupee and strengthening dollar,” said Sharma of Green Portfolio.

8. Concerns over slowing growth

The Indian economy is showing signs of weakness, with several top global agencies revising their growth forecasts for the country for the current year. This has raised concerns among both domestic and foreign investors, as the durability of India’s growth story was a key factor in attracting investors to the Indian stock market.

India’s gross domestic product (GDP) is expected to grow by 6.4 per cent in the financial year 2024-25, according to the Ministry of Statistics & Programme Implementation’s (MoSPI) official release on January 7. This marks a four-year low and a fall from its 8.2 per cent growth in the financial year 2024-25.

Slowing growth has raised concerns about downgrades, further accelerating the fall in the Indian currency and the outflow of foreign capital.

Meanwhile, media reports suggested that the global financial services firm HSBC has downgraded Indian equities from ‘neutral’ to ‘overweight’ amid concerns over high valuations and slowing growth momentum.

International Monetary Fund (IMF) MD Kristalina Georgieva has predicted that the Indian economy is likely to be “a little weaker” in 2025 despite projected steady global growth, according to a PTI report.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.