Why did Indian stock market crash today?

On Monday, the BSE Sensex and the NSE Nifty witnessed a crash.

While the Sensex lost over 800 points to end at 75,366.17, the Nifty ended 274 points in the red to close at 22,817.30.

According to a report, the market capitalisation of all listed companies on the BSE dropped by Rs 9.48 lakh crore.

But what happened? Why did markets crash today?

Let’s take a closer look:

What happened?

As per Moneycontrol, the BSE Sensex on Monday, which opened at 75,700.43, hit an intraday low of 75,283.49.

Meanwhile, while the NSE Nifty fell under the 23,000 mark to touch the day’s low of 22,786.90.

The 30-share BSE Sensex declined 1.08 per cent on Monday, while the broader NSE Nifty lost 1.14 per cent.

Zomato, HCL Technologies, PowerGrid, Tata Motors, Adani Ports, Reliance Industries, IndusInd Bank, Infosys, Tata Consultancy Services, and HDFC Bank were among the worst performers today.

The India Volatility Index was over eight per cent, as per Moneycontrol.

As per Business Standard, the overall market was extremely negative today with 3,300 stocks in the red compared to a mere 490 stocks in the green.

As per ET Now, the market capitalisation of all the BSE listed companies was at 41,077,465.52 crore around 11:45 am.

That figure was at Rs 42,086,673.46 crore on Friday.

The Nifty MidCap index slid 2.7 per cent intraday, while the Nifty SmallCap dropped four per cent.

When it comes to smallcap index, CreditAccess Grameen, Netweb Technologies India, Newgen Software Technologies, Alldigi Tech, Dhani Services, Tejas Networks, Solara Active Pharma Sciences and KP Energy were down in double digits.

Why did markets crash?

There are a number of factors behind the Indian stock market’s crash today.

These include uncertainty about the US’ policies on trade and tariffs, the looming Federal Reserve meeting, markets around the world declining, Foreign Institutional Investors continuing their exodus.

Trump’s announcement of a 25 per cent tariff on Colombia for refusing to accept a plane full of migrants has not gone down well with investors.

“A major concern is that President Trump is introducing new threats, like the 25 per cent tariff on Colombia for refusing to accept deported illegal immigrants,” Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told The Times of India. “The potential tariffs on Canada and Mexico are weighing on the markets.”

Colombia later agreed to accept military aircraft carrying deported migrants.

“While tariffs may still play a role, Trump’s administration is likely to adopt a more targeted approach. Following the “Small Yard, High Fence” principle, tariffs and restrictions would be concentrated on sectors that pose risks to economic and national security. This strategy ensures that measures are precise and limited, minimizing unnecessary disruption while addressing critical concerns. China, a focal point of Trump’s trade policies, is expected to face targeted tariffs on key sectors, particularly those tied to advanced technology or industries deemed strategically significant,” a YES Securities note stated, as per Business Today.

Investors are also laser-focussed on the Federal Reserve’s first policy meeting this year.

The meet, which is to be held on January 28 and 29, will likely see Fed policymakers keep interest rates steady.

This would mark the first pause in the rate-cutting cycle that began last September.

Global markets also offered no cheer to the Sensex and Nifty.

The S&P 500 dropped 1 per cent while the Nasdaq 100 futures declined dropping 1.9 per cent.

Meanwhile, worries about DeepSeek’s AI model played havoc on the minds of investors worried about the future profits of tech giants such as Nvidia, OpenAI, and Google.

DeepSeek, whose researchers wrote in a paper last month that the DeepSeek-V3 used Nvidia’s H800 chips for training and spent just under $6 million (Rs 51 crore), overtook ChatGPT to become the top-rated free application available on Apple’s App Store in the United States.

Markets in Asia were more mixed.

The Hong Kong’s Hang Seng Tech Index rose two per cent, while Japan’s Nikkei 225 futures dropped 0.6 per cent.

Nvidia supplier Advantest Corp saw its shares decline a precipitous 8.6 per cent in Tokyo, while SoftBank Group declined 5.4 per cent.

India’s Union Budget is also looming.

Ankita Pathak, Chief Macro and Global Strategist at Ionic Wealth said, “The first full year budget under Modi 3.0 will continue to be interesting, but the real benchmark of a good fiscal policy are credibility and continuity. On these parameters, the past few budgets have delivered well. For FY25, we believe the fiscal deficit can be lower (our estimate is 4.7 per cent) than the budgeted 4.9 per cent despite the growth slowdown, given the lower capital expenditure in the year and additional revenue from RBI dividends,” Pathak said.

She said investors are looking forward to cuts in income tax. She said markets can rally if the government decides to go ahead meaningful changes in income tax slabs.

The behaviour of foreign investors has also come under scrutiny.

As per India Today, foreign investors have withdrawn Rs 69,000 crore from the Indian market in January alone.

This, as domestic institutional investors (DIIs) have put in Rs 67,000 crore in the same period.

But other experts warned that worse may yet come.

“On Friday, about 50 per cent of NSE 500 stocks pulled back at least 2 per cent from the day’s high, indicating a sharp reduction in risk appetite,” Anand James, Chief Market Strategist, Geojit Financial Services, told Moneycontrol.

“For the Nifty, a push above 23,211 is required to signal strength. Otherwise, the index may test levels of 22,260 to 22,000 in the coming sessions.”

Sameet Chavan, Head Research, Technical and Derivative, Angel One, told ET Now, “Technically, prices have corrected over 12 per cent and are approaching a crucial point. On the weekly chart, the price action since September resembles a ‘Falling Wedge’ pattern, with the lower boundary coinciding with the 127 per cent reciprocal retracement of the November bounce, around 22900-22800. This zone may act as a key support for the bulls during the event week, supported by a positive divergence in the RSI, which is currently in the oversold zone.”

With inputs from agencies