Sensex Crashes 700 Points; Investors Lose ₹5 Lakh Crore – Why is the Market Falling?

The Indian stock market saw a sharp decline on Monday, February 3, as weak global trends triggered heavy selling. The Sensex dropped over 700 points, while the Nifty 50 slipped below 23,250. The market capitalisation of BSE-listed firms fell by ₹5 lakh crore within minutes of opening.

Market Performance

• Sensex: Opened lower and fell over 700 points to 76,791.09 from its previous close of 77,505.96.
• Nifty 50: Dropped by 1% to 23,246.55 from the previous close of 23,482.15.
• Mid and Small Caps: The BSE Midcap and Smallcap indices declined by over 1%.
• Market Cap Loss: The total valuation of BSE-listed companies fell from ₹424 lakh crore to ₹419 lakh crore.

Reasons Behind the Market Crash

1. Weak Global Cues

Stock markets worldwide tumbled after US President Donald Trump imposed tariffs on Canada, Mexico, and China. This raised fears of a trade war, impacting global economic growth. Japan’s Nikkei and Korea’s KOSPI dropped 3% each.

2. Trump’s Tariff Policy

Trump imposed 25% duties on Canada and Mexico, along with a 10% tariff on Chinese imports. Experts believe this move could trigger further trade disputes, disrupting the global economy. While China has approached the WTO instead of retaliating immediately, Canada and Mexico have already imposed countermeasures.

3. Rising Dollar and Falling Rupee

The Indian rupee hit a record low of 87 per US dollar. The dollar index surged above 109.6, prompting more selling by foreign investors, further pressuring Indian equities.

4. RBI’s Monetary Policy Uncertainty

Investors are cautious ahead of the Reserve Bank of India’s (RBI) upcoming policy meeting. While the Union Budget introduced tax benefits to boost demand, markets are waiting to see if the RBI will cut interest rates by 25 basis points.

5. Heavy Foreign Investor Selling

Foreign institutional investors (FIIs) have been offloading Indian stocks since October 2024. Between October 1, 2024, and February 1, 2025, FIIs sold nearly ₹2.7 lakh crore worth of equities, leading to persistent market weakness. Rising US bond yields, expensive stock valuations, and weak quarterly earnings have further driven FIIs away.

Conclusion

A mix of global trade tensions, a stronger dollar, and foreign capital outflows have led to today’s sharp fall in the Indian stock market. Investors are closely watching RBI’s policy decisions and global market movements to assess the next trend.

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