With less than a week left before the budget announcement, investors are keenly observing the stock market trends. However, the market has already faced a significant downturn on the first day of the budget week, leading to a staggering loss of ₹9.50 lakh crore in just a few hours. This decline is not a trivial occurrence, and multiple factors contribute to this slump, notably the impending announcement by the U.S. central bank regarding its policies. Understanding the impacts of global events and domestic sentiment can help investors navigate these turbulent waters.
Significant Drop in Stock Market
On the first day of the budget week, a major decline was observed in the stock market. The BSE Sensex dropped by 842.4 points during the trading session, bringing it down to 75,348.06 points, marking an eight-month low. For comparison, on June 7, 2024, the Sensex was at 75,000 points. As of now, at 11:50 AM, the Sensex stands at 75,520.76 points, down by 684.99 points. Throughout January, the Sensex has decreased by approximately 4%, indicating a troubling slide.
The Nifty index from the National Stock Exchange (NSE) also mirrored this downward trend. During trading, the Nifty fell 265.35 points to reach a low of 22,826.85 points, the lowest level since June. Currently, Nifty is trading at 22,896.75 points, down by 195 points, and has seen a decline of over 3.50% in January alone.
Stocks Experiencing Declines
Examining the stocks that have taken a hit, shares of Nifty companies such as Power Grid, Tech Mahindra, Wipro, Tata Motors, and HCL Tech have experienced declines of over 2%. On the BSE, stocks like Zomato, TCS, Bharti Airtel, Infosys, Reliance, and HDFC Bank are also seeing downward pressure.
In contrast, there are some stocks appreciating amid the mayhem. NSE-listed Britannia has surged by over 2%, while ICICI Bank has gained 1.72%. Hindustan Unilever and SBI have shown a gain of about 1%, and on the BSE, ITC, Nestle India, Maruti, and Ultra Cement are also witnessing an upward trend.
Impact on Investors
The downturn has resulted in substantial losses for investors. The market capitalization on the BSE was ₹4,19,51,853.99 crore at the close of trading on Friday. As the Sensex reached an eight-month low, the market cap plummeted to ₹4,10,00 crore, indicating a staggering loss of ₹9.50 lakh crore within the trading session.
Primary Reasons for Stock Market Decline
- Trump’s Policies: Recent tariffs and restrictions announced by U.S. President Donald Trump, including a 25% tariff on Colombia, have raised concerns. If Colombia agrees to accept displaced migrants without restrictions, the tariff may not be enforced.
- Anxiety Over Federal Reserve Decisions: With the U.S. central bank expected to announce policy rates, investor apprehension is mounting, leading to increased volatility in stock markets.
- Weak Q3 Earnings Projections: A slowdown in Q3 earnings is putting pressure on the stock market. According to Bloomberg, Nifty 50 companies are expected to see only a 3% YoY rise in EPS.
- Continued Selling by FIIs: Foreign Institutional Investors (FIIs) are heavily selling, having withdrawn ₹64,156 crore from the stock market as of January 24, 2025, with no signs of slowing down.
- Strength of the Dollar: Concerns about additional tariffs on U.S. trading partners like China and Mexico have intensified market fears, with the dollar index rising by 0.21% to 107.66.
Market Downturn Over Four Months
In the last four months, the stock market has witnessed a substantial slide. On September 27, the BSE Sensex reached its lifetime high at 85,978.25 points. By January 27, it had plummeted to 75,348.06 points, marking a decline of 10,630.19 points, or approximately 12.36%. Meanwhile, the Nifty index fell from its high of 26,277.35 points on the same date, reflecting a drop of about 13.13%.