The Indian stock market faced significant downward pressure recently, as the benchmark indices—Sensex and Nifty 50—experienced considerable declines due to global economic factors and internal pressures. On February 24, the Sensex dropped over 800 points during intraday trade, marking its fifth consecutive session of losses amid worries over international trade dynamics and persistent outflows of foreign capital.
The opening figures for the day were bleak: the Sensex started at 74,893.45, down from its previous close of 75,311.06, reflecting immediate investor anxiety. Similarly, the Nifty 50 began at 22,609.35 and fell over 1 percent to touch 22,548.35, driving fears of extended losses across the market. Broader markets mirrored this trend, with BSE Midcap and Smallcap indices also feeling the impact, each dropping over 1 percent.
Analysts have pointed to several compounding factors contributing to this decline. A significant worry is the economic policies enacted by U.S. President Donald Trump, particularly his tariff announcements which have ignited fears of a burgeoning trade war. These tariffs are feared to inhibit global economic growth, which is already showing signs of strain.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, "The market is facing headwinds from relentless FII selling and global uncertainties relating to Trump tariffs." The sell-off has been relentless, with foreign portfolio investors having offloaded nearly ₹37,000 crore worth of Indian equities by February 21, 2025, alone.
Equally troubling are the signs of economic slowdown within India itself, which are weighing on investors' risk appetite. Recent macroeconomic data suggests India's growth rate could slow to 6.4 percent for 2025, down from 6.6 percent the previous year, largely attributed to external pressures, including the U.S. tariffs and diminished global demand for exports.
Beyond domestic factors, Indian investors are also reacting to the performance of Chinese stocks, which have seen healthy gains recently due to government measures bolstering their economy. This trend has sparked concerns of capital flowing from Indian markets to more attractive, undervalued Chinese equities. Vijayakumar added, "The ‘sell India, buy China’ trade may continue for some time since Chinese stocks continue to be attractive."
The U.S. markets have been struggling, reporting significant downturns primarily due to disheartening economic indicators. The S&P Global’s flash U.S. Composite PMI Output Index reported its lowest reading since September 2023, with figures indicating solid contraction across both manufacturing and service sectors, alarming investors worldwide. The Dow Jones Industrial Average plunged by 748.63 points, or 1.69%, prompting fears of extended losses and showcasing the vulnerabilities natural to cross-border market dependencies.
Ruby Dollar’s decline also poses additional challenges for Indian equities since it compounds the impact of foreign selling, making it increasingly difficult for the Indian stock market to remain attractive. According to analysts, continuing pressures from U.S. inflation and softening growth are influencing global market sentiments negatively.
Market reactions have been swift and volatile, with broad declines across most sectors—12 of the 13 major sectors fell during recent sessions. Notably, financials took significant hits, dropping 1.4%, and information technology sectors went down 2.2%, significantly affected by the perceived threat to future revenue streams due to uncertainties surrounding tariffs and global growth.
Market analysts like Sunny Agrawal from SBICAPS Securities have pointed out the continuing underperformance of Indian shares compared to other regional players, noting, "The underperformance was mainly due to underlying weak sentiment due to concerns over tapering off of earnings growth." The current trends indicate serious investor uncertainty which could persist if conditions do not stabilize.
With all signs pointing to continued instability, it remains to be seen what the future holds for the Indian stock market. The volatility of global influences will likely keep local investors on edge for the foreseeable future, and many are left to ponder whether these sell-offs indicate larger systemic issues or simply short-term reactions to fleeting news cycles.
While the current market is tumultuous, experts urge investors to remain vigilant and patient. They stress the importance of monitoring the broader economic developments both domestically and internationally to inform prudent investment decisions moving forward.
Despite the grim short-term outlook, analysts remain hopeful for potential recovery signs once clarity around policy measures and global economic trends surface, allowing investors to reassess their positions without panic. For now, focusing on informed decision-making based on reliable market data is key to weathering the current storms of uncertainty.