Indian stock markets witnessed a severe sell-off this week, with key benchmark indices extending their losses for the fifth consecutive trading session on Friday. The relentless downturn has rattled investor confidence, driven by a confluence of global headwinds and persistent foreign fund outflows.
Market Carnage: The Numbers Tell the Story
The bleeding in the equity markets has been deep and sustained. The BSE Sensex has plummeted by over 2,100 points in just five sessions. From its close of 85,762.01 on January 2, the index crashed to an intraday low of 83,506.79 on Friday. Mirroring this fall, the NSE Nifty 50 also tumbled, breaking below the critical 25,700 level during this period. The collective plunge represents a decline of over 2% for both indices in recent trading.
Key Factors Behind the Market Mayhem
Analysts point to multiple interconnected factors that have fueled the panic selling and turned market sentiment deeply cautious.
1. Foreign Investors Head for the Exit
A major driver of the weakness has been the relentless selling by Foreign Institutional Investors (FIIs). Data shows that FIIs sold Indian shares worth a substantial Rs 3,367.12 crore on Thursday, January 8. This marked the fourth straight session of net selling, barring a brief pause on January 2. This steady exodus of overseas capital has intensified the downward pressure on benchmark indices, forcing them lower amid an uncertain global backdrop.
2. Trump's Tariff Sword Hangs Over Indian Markets
Equity markets have remained under intense strain after former US President Donald Trump indicated that tariffs on Indian exports could be raised sharply. The trigger is New Delhi's continued purchases of Russian crude oil. Trump has approved a new bill proposing 500% tariffs on countries buying Russian oil. The uncertainty is compounded by a stalled bilateral trade agreement, despite six rounds of talks since March.
US Commerce Secretary Howard Lutnick suggested on the All-In Podcast that talks lost momentum after Prime Minister Narendra Modi did not call Trump. The Trump administration has already imposed tariffs of up to 50% on certain Indian goods, which India has termed "unfair, unjustified and unreasonable."
All eyes are now on a pending ruling by the US Supreme Court on the legality of Trump's tariff actions. A verdict against the tariffs could force Washington to return nearly $150 billion to importers, a move with massive implications for global trade.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted, "After the sharp correction yesterday triggered by the possibility of about 500% tariff on India... the market will be focused on the verdict expected today." He added that if the Supreme Court declares the tariffs illegal, a rally in Indian markets is likely as India has been "the worst affected."
3. Global Cues and Rising Oil Prices Add Pressure
Weak signals from overseas markets have reinforced the cautious mood. Asian stocks also slipped as investors awaited a key US jobs report and the crucial Supreme Court decision. Furthermore, firming crude oil prices have added another layer of worry for India, a major oil importer. Prices have moved higher amid geopolitical risks, including recent developments in Venezuela.
Technical Outlook Points to Further Weakness
Chart analysts warn that the technical picture has turned decidedly bearish. Shrikant Chouhan, Head of Equity Research at Kotak Securities, stated that the market breached the 20-day Simple Moving Average support, leading to intensified selling. He believes that as long as the Nifty trades below 26,000 (Sensex below 84,500), the weak sentiment could persist, with potential downside targets at 25,750-25,700/84,000-83,700.
Geojit Investments also flagged caution, noting that while short-term oscillators are oversold, a breach below 25,776 for the Nifty could signal a sharper fall towards its 200-day SMA at 25,039.
Silver Lining: Opportunities in the Rubble?
Despite the gloom, some experts see a buying opportunity in the broad-based sell-off. Dr. Vijayakumar pointed out that the recent sharp correction has dragged down stocks in sectors like financials, consumer discretionary, and industrials, which may not be directly impacted by potential US punitive measures. For long-term investors, this presents a chance to accumulate quality names at lower valuations.
(Disclaimer: Recommendations and views on the stock market given by experts are their own and do not represent the views of this publication.)
