Sensex down 1,459 points in 4 days, Nifty slides 2%: What's driving the Indian stock market slump? Here are 4 key reasons
Sensex
tumbling 1,459 points and the
Nifty
50 sliding nearly 2% over the past four days, as mounting global trade tensions, foreign fund outflows, and tariff uncertainty dragged down benchmark indices.
On Monday, the Sensex dropped as much as 527 points from its intraday high to touch a low of 82,010 before recovering partially to close at 82,253.46, down 247 points or 0.30%. The Nifty 50 declined 67.55 points, or 0.27%, to settle at 25,082.30, after dipping to the day's low of 25,001.95. The broader sell-off has pulled the Sensex down 1.7% and the Nifty 50 nearly 1.7% over the past four sessions.
Meanwhile, the broader market showed resilience, with the BSE Midcap and Smallcap indices gaining on the day.
Here are 4 factors for the fall
1. Global trade concerns
Investor sentiment took a hit after U.S. President Donald Trump ratcheted up his aggressive tariff stance, announcing a 35% tariff on imports from Canada, followed by a 30% tariff on goods from Mexico and the European Union, effective August 1.
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Markets are now wary that a prolonged trade war could significantly dent global growth prospects. Closer to home, while reports suggest that Washington and New Delhi are exploring an interim trade deal, uncertainty remains high.
"Market is expecting a U.S.-India trade deal soon with a tariff rate of around 20% for India. If this happens the market will get a sentimental boost. Any disappointment on this front can drag the market further down," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Despite India's relatively strong economic outlook, GDP is projected to grow over 6% in FY26, analysts warn that the country may not be completely insulated from global volatility.
2. Foreign investors turn sellers
Foreign portfolio investors (FPIs) have turned net sellers of Indian equities after a four-month buying spree, adding pressure on the benchmark indices, particularly large-cap stocks where FPIs have significant exposure.
On July 11, foreign institutional investors (FIIs) offloaded shares worth Rs 5,104.22 crore. In contrast, domestic institutional investors (DIIs) provided some support, purchasing equities worth Rs 3,558.63 crore on the same day.
"There are signs of FPI inflows weakening. After three months of positive inflows FPI has turned negative, though marginally, so far in July," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, adding that the selling on July 11 reflect the first negative inflow number after three months of positive inflows in April, May and June.
The shift in FPI sentiment has weakened momentum in frontline stocks, contributing to the broader correction witnessed over the past week.
"FPI selling in July after three months of buying can be attributed to the recovery in the market from the March lows and the consequent elevated valuations. Since other markets are cheaper relative to India, FIIs may again sell and move money to cheaper markets as a short-term strategy. In H1 2025 Indian market underperformed most markets including the MSCI EM index," said Vijayakumar.
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