Sensex crashes over 700 points; investors lose ₹6 lakh crore; why is Indian stock market falling?

Stock market crash: The Indian stock market continued witnessing selling pressure for the fourth consecutive session on Monday, February 10, with benchmark Sensex falling over 600 points and Nifty 50 moving near 23,350 on the downside in the intraday trade.

The BSE barometer Sensex opened at 77,789.30 against its previous close of 77,860.19 and dropped 753 points to the level of 77,106.89. Its NSE counterpart, the Nifty 50, opened at 23,543.80 against its previous close of 23,559.95 and fell 244 points, or 1 per cent, to the level of 23,316.30.

The selloff was widespread across segments and even more severe in the mid-and small-cap categories, as the BSE Midcap and Smallcap indices plunged over 2 per cent each.

The overall market capitalisation (m-cap) of BSE-listed firms fell to nearly ₹418 lakh crore from nearly ₹424 lakh crore in the previous session, making investors lose about ₹6 lakh crore in a session.

Finally, the Sensex closed 548 points, or 0.70 per cent down at 77,311.80, while the Nifty 50 settled at 23,381.60, lower by 178 points or 0.76 per cent. The BSE Midcap index fell 2.06 per cent, and the Smallcap index ended with a loss of 2.25 per cent.

Shares of HDFC Bank, Reliance Industries and Infosys were the top drags on the Sensex index.

Nearly 200 stocks, including Tube Investments of India, Star Health and Allied Insurance Company, Gujarat Gas and 3M India, hit their 52-week lows in intraday trade on the BSE.

What drove the Indian stock market down today?

Experts pointed out the following five factors that could be behind the market selloff:

1. Trump’s tariff

US President Donald Trump has been dealing a blow to market sentiment due to his tariff policies. According to a Reuters report, Trump said he would announce new 25 per cent tariffs on Monday on all steel and aluminium imports into the US, in addition to the existing metals duties. The report further added that he plans to announce reciprocal tariffs on many countries by Monday or Tuesday next week.

2. Stretched valuation despite correction

The Sensex has corrected over 9 per cent from its all-time high of 85,978.25, hit on September 27 last year. However, despite this correction, the market valuation remains high, keeping investors cautious.

“It is important to understand that valuations in India continue to be on the higher side, particularly in the broader market. The market needs fundamental triggers like indications of GDP growth and earnings rebound. Until then the market is likely to move only in a range. Investors should stick to fairly valued high-quality large-caps,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Valuation guru Aswath Damodaran believes the Indian stock market is the most expensive equity market in the world, and no amount of handwaving can justify its valuation.

3. Weak earnings continue weighing on sentiment

Weak corporate earnings remain a major factor behind the ongoing correction in the Indian stock market. Even though Q3 earnings have been marginally better than the last two quarters, it has failed to boost market sentiment.

4. Relentless foreign capital outflow

The Indian stock market has been witnessing a heavy foreign capital outflow since October last year. So far in February, foreign institutional investors (FIIs) have offloaded Indian equities worth over ₹10,000 crore. Overall since October, they have sold off Indian equities nearly worth ₹2.75 lakh crore.

“Selloff by FIIs is perhaps the biggest reason behind the recent market downturn. They continue to sell, while concerns over US tariff policies further weigh on sentiment,” said Prashanth Tapse, Senior VP of Research at Mehta Equities.

5. Rupee’s weakness

The Indian rupee hit a fresh record low on Monday. It slipped 52 paise to an all-time low of 87.95 against the US dollar as against Friday’s close of 87.43 per USD. The domestic currency has declined nearly 3 per cent this year, weighing on market sentiment.

A weak rupee signals economic weakness and accelerates foreign capital outflows, further dampening market sentiment.

“Rupee hit another all-time low of 87.95 against the dollar in early trading, witnessing a sharp 0.55rs drop. However, buying interest emerged as the rupee neared the 88.00 mark, leading to a partial recovery towards 87.47 by mid-session,” Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said.

“The continued outflow of funds post-budget and RBI policy weighed on sentiment, as neither event provided any substantial reforms or structural shifts beyond higher tax slabs for retail and a minor rate cut from the RBI. With ongoing capital outflows, global trade tensions, and a strong dollar, rupee volatility is expected to persist in the 87.25 – 88.00 range,” Trivedi said.

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