Stock market turmoil wipes out Rs 3 lakh crore, five major factors behind the crash

Mumbai (The Uttam Hindu): The Indian stock market recorded a sharp decline on Tuesday, causing panic among investors. Both the Sensex and Nifty indexes fell more than 1 percent, closing in the red. The Bombay Stock Exchange (BSE) Sensex fell 1,069 points, or 1.28 percent, to 82,225.92. The National Stock Exchange (NSE) Nifty fell 1.12 percent to close at 25,424.65. Due to this heavy selling, the total market cap of companies listed on the BSE fell from ₹469 lakh crore to ₹466 lakh crore. This resulted in a direct loss of ₹3 lakh crore for stock market investors. Mid-cap and small-cap indexes also suffered losses, although they performed slightly better than the main indexes.

Looming fear of US tariffs

The biggest reason for this massive fall in the market is believed to be America's new tariff plan. After the US Supreme Court rejected Trump's global tariff, the Trump administration is now preparing to use Section 232 of the Trade Expansion Act of 1962. Trump has issued a stern warning to those countries that will support the Supreme Court's decision. Markets across the world are keeping an eye on the US President's 'State of the Union' address on Tuesday. News of the deal between the European Union and the US being stalled has also created huge panic in the market regarding the tariff drama.

Rising tensions between the US and Iran

The second biggest cause of investor concern is the rapidly evolving situation in Iran and its growing tensions with the United States. Amid ongoing violent protests and reports of thousands of deaths in Iran's government crackdown, the United States has threatened military action. This geopolitical uncertainty has led investors to resort to safe-haven investments and sell heavily ahead of the next round of nuclear talks between the two countries on February 26th.

IT stocks remain under heavy selling pressure

The IT sector played a key role in dragging down market sentiment. The Nifty IT index fell nearly 5 percent on Tuesday and has plunged 21 percent so far this month. The growing influence of Artificial Intelligence (AI) and fears of higher interest rates in the US have triggered a massive sell-off across the IT sector. Major IT stocks across the world are under heavy pressure after Anthropic claimed to automate old programming languages through its cloud code tool.

Continuous rise in crude oil prices

Rising global crude oil prices have proven to be another major villain for the Indian market. Brent crude prices have risen 1 percent to cross $72 per barrel, near their highest level in six months. For a major oil importer like India, rising crude oil prices put pressure on economic stability. This signals rising inflation and a weakening rupee, which has shaken investor confidence.

A strengthening dollar and fears of foreign capital withdrawal

A 0.20 percent rise in the dollar index has also dented the Indian stock market. A strengthening dollar significantly increases the risk of foreign capital outflows from emerging markets like India. Foreign institutional investors (FIIs) recently began investing in Indian markets following the announcement of the India-US trade deal, but this continued strength of the dollar and the high valuations of the Indian market could derail this flow of foreign investment at any time.