Sensex crashes over 600 points, Nifty 50 dips below 25,200. Why is the Indian stock market falling today?

Mint

3 days ago

Indian stock market suffered significant losses in Friday's session, with benchmarks the Sensex falling over 700 points and the Nifty 50 slipping below the 25,150 mark during the session.
The Sensex opened at 82,820.76 against its previous close of 83,190.28 and dropped over 700 points, or almost 1 per cent, to an intraday low of 82,451.50.
The NSE counterpart Nifty 50 started the day at 25,255.50 against the previous close of 25,355.25 and declined by nearly 1 per cent to an intraday low of 25,136.75.
The selloff was broad-based as the BSE Midcap and Smallcap indices also dropped by almost 1 per cent each during the session.
The overall market capitalisation of BSE-listed firms dropped to nearly ₹ 457 lakh crore from ₹ 460 lakh crore in the previous session, making investors poorer by about ₹ 3 lakh crore in a day.
Around 12:45 PM, the Sensex was 615 points, or 0.74 per cent, down at 82,576, while the Nifty 50 was 0.68 per cent down at 25,183.
A combination of factors is dragging the domestic market down. Let's take a look at five key factors behind the market selloff today:
TCS reported Q1 numbers on July 10, which failed to meet market expectations. It was the IT giant's third straight quarter of lower revenue.
As Mint reported, TCS recorded revenue of $7.42 billion in the June quarter, down 0.59 per cent quarter-on-quarter and 1.12 per cent from a year before. The earnings lagged estimates of 33 analysts polled by Bloomberg, who expected TCS to clock $7.54 billion in revenue. This was TCS's worst Q1 performance since June 2020, when its revenue fell 7 per cent sequentially.
Market participants pointed out that the weak start of the earnings season has further deteriorated market sentiment, which has already been fragile for over a month now due to tariff-related concerns and elevated valuations.
US President Donald Trump further escalated the trade war as he, on Thursday, 11 July, announced a 35 per cent tariff rate for goods imported from Canada, starting August 1.
Moreover, he signalled that the baseline tariff rates for countries that do not get tariff letters could be set at 15 per cent or 20 per cent, higher than the current 10 per cent.
Trump's fresh tariff threats have dashed hopes of an early resolution of the trade war, raising concerns that higher tariffs will drive up inflation and cause a global economic slowdown.
As earnings remain sombre, the market's premium valuation seems to have made investors cautious.
Shibani Kurian, senior fund manager and the head of equity research at Kotak Mahindra AMC, pointed out that in the near term, the market may give moderate returns as valuations are elevated.
"At present, Nifty trades at a PE (price-to-earnings) of nearly 22 times FY26E EPS (earnings per share), with consensus estimating earnings growth at low double digits for FY26E," Kurian said.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, underscored that the overvaluation of the broader market is getting corrected.
"India is underperforming markets like South Korea, Germany, Japan and MSCI EM. This is largely due to the elevated valuations in India," said Vijayakumar.
Increasing tariff-related uncertainties have weakened investors' risk appetites, as they are offloading riskier equities and rushing to safe-haven assets like gold.
MCX Gold August 5 contract jumped nearly 1 per cent to an intraday high of ₹ 97,548 per 10 grams, while MCX Silver September 5 contract hit a record high of ₹ 1,11,552 per kg in Friday's session.
The technical structure of the Nifty 50 indicate further weakness.
According to Shrikant Chouhan, the head of equity research at Kotak Securities, the Nifty 50 has also formed a bearish candle on the daily chart and has formed a lower top on the intraday chart, which is largely negative.
Chouhan believes the short-term market scenario is weak, and fresh selling is possible after breaking below the 25,330.
"Below 25,330, the market may slip towards 25,200-25150. A sustained break below 25,170 may lead to further weakness towards the 25,050 level. Look for value buying between 25,150 and 25,050 levels," said Chouhan.
According to Hardik Matalia, a derivative research analyst at Choice Equity Broking Private Limited, a decisive break below 25,330–25,300 could lead to extended selling pressure, dragging the index further down towards the 25,100–25,000 levels. On the upside, immediate resistance is seen around 25,500, followed by a strong hurdle near 25,600.
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