Stock Market Crash: Why market is falling today: Investors lose over Rs 14 lakh cr; 8 factors fueling Sensex crash

Indian blue-chip equity indices, Sensex and Nifty, traded in the deep red on Monday, following an unexpectedly strong US jobs report that dampened expectations of early interest rate cuts by the Federal Reserve. Concerns over slowing earnings also weighed on market sentiment.

The BSE Sensex fell over 1,100 points to the day’s low of 76,250, while the Nifty50 slipped 350 points to 23,047.

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Meanwhile, the market capitalisation of all listed companies on BSE declined by Rs 14.54 lakh crore to Rs 416.08 lakh crore.

All the major sectoral indices declined. The broader, more-domestically focussed small- and midcaps lost about 1.4% each at open.

8 key factors behind today’s market fall:

1) US jobs growth

Data released on Friday revealed that US job growth unexpectedly accelerated in December, pushing US 10-year Treasury yields to 14-month highs. This raised the likelihood of fewer rate cuts in 2025, making emerging markets like India less attractive for investment.

“Market will continue to be under pressure from the many strong headwinds. The blow out jobs data from the US with 2.56 lakh job creation in December against expectations of 1.65 lakhs means the rate cut expectations in 2025 is now down to one. With the unemployment in the US down to 4.1% the economy doesn’t need any stimulus. This good economic news is turning out to be bad news for markets which were discounting many rate cuts this year,” said V K Vijayakumar of Geojit Financial Services.

2) Bond yields

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The 10-year US Treasury yield surged to 4.73%, its highest since April, following strong job data and robust services sector performance. Analysts expect the Fed to hold rates in January, further strengthening the dollar and pushing bond yields higher.

“With the US 10-year bond yield above 4.7 % FIIs will continue to sell offering opportunities for long-term investors to buy reasonably priced large-caps, particularly in banking. The broader market will continue to be under pressure,” Vijayakumar said.

3) Continued FIIs selling

Foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) show no signs of slowing their selling spree in 2025. As of January 10, 2025, they have offloaded Rs 22,259 crore worth of equities in the Indian market.

4) Oil hits more than 3-month high

Oil prices hit their highest level in more than three months on Monday’s open, extending their rally on expectations that wider US sanctions will affect Russian crude supplies to the world’s top and third largest importers China and India.

Brent crude futures climbed $1.35, or 1.69%, to $81.11 a barrel after hitting an intraday high of $81.44, the highest since Aug. 27. US West Texas Intermediate crude rose $1.40, or 1.83% to $77.97 a barrel after touching a high of $78.32, the loftiest price since Oct. 8.

5) Rupee crashes to life time low

With the dollar index at around 109.9, Rupee crashes 23 paise to hit life-time low of 86.27 against US dollar in early trade. Currency exchange rate and foreign outflows are interlinked as both cause and effect.

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While FII outflows put pressure on the rupee to depreciate due to higher demand for dollars, a weakening rupee increases currency risk for FIIs, potentially triggering further outflows.

6) Economic slowdown

The Indian government’s advance estimates for GDP in FY25 has confirmed a slowdown. The real GDP growth for FY25 is estimated to slow to 6.4% YoY from 8.2% in FY24, below the Ministry of Finance’s forecast of 6.5% and the RBI’s projection of 6.6%.

“This will have many ramifications for consumer and business confidence, wage growth, corporate revenues, consumption, investment, credit demand and, most importantly, the fiscal arithmetic,” said Rahul Bajoria of BofA Securities India.

7) Earnings downgrade

After 4 consecutive years of healthy double-digit growth, India Inc has been witnessing earnings downgrade in the last 2 quarters. Q3 numbers are unlikely to surprise on the upside. Brokerages see FY25 full-year earnings growth in single digits.

8) Domestic consumer price inflation data

Meanwhile, investors also await domestic consumer price inflation data, due after market hours on Monday. Inflation in India likely eased to 5.3% in December, driven by moderating food prices, according to a Reuters poll. This could support expectations for an interest rate cut by the RBI next month, especially as economic growth slows. However, if the US Fed holds rates, the RBI may pause its own cuts to maintain financial stability.