Why did Indian stock market fall today? Explained with five crucial reasons

Stock market crash: Indian stocks came under significant selling pressure in Friday’s trading session, January 17, driven by a sharp sell-off in banking and IT counters, which caused the frontline indices to end the session lower, breaking their 3-day winning streak.

The sell-off could have been more severe if heavyweights such as Reliance Industries and ITC had not supported the markets, along with a few metal and pharma stocks, which helped the frontline indices recover some of the losses seen earlier in the day.

Amid this backdrop, the Nifty 50 ended the session with a drop of 0.47% at 23,203 while the Sensex closed at 76,624, marking a 0.54% fall from the previous close. The broader market, on the other hand, continued to outperform the front-line indices, for the fourth consecutive trading session and managed to end the session in green.

The Nifty Midcap 100 index rose 0.23% to 54,607, while the Nifty Smallcap 100 index concluded the day with a gain of 0.16%, closing at 17,672.

The weak set of numbers reported by Axis Bank dragged major banking stocks into negative territory, while Infosys’s results pulled down the entire IT pack. Although Infosys’s Q3FY25 numbers came in line with analysts’ estimates, concerns were raised about the quality of earnings.

Morgan Stanley noted that revenue growth was driven by a higher component of “third-party items” in the deal pipeline, which raised concerns about the quality of the results.

Infosys and Axis Bank were the top losers in today’s trade, with the former losing 6% of its value, while the latter tumbled by 4.5%. Overall, 21 constituents of the Nifty 50 ended the session in the red.

On the winner’s list, Reliance Industries shares settled nearly 3% higher, followed by BPCL, Hindalco, Coal India, Nestle India, and Bharat Electronics, all ending with gains ranging between 2% and 2.5%. Asian Paints also ended the session with a gain of 2.1%, snapping a 5-day losing streak.

In terms of sectoral performance, Nifty IT emerged as the top loser with a decline of 2.68%, followed by Nifty Private Bank, which dropped by 2.17%. Conversely, Nifty Oil & Gas stood out as the top performer, gaining 1.6%, followed by Nifty Realty, Nifty Infra, Nifty Energy, Nifty Metal, and Nifty FMCG, all ending with gains of over 1%.

Apart from weak earnings by major companies, experts highlighted the following key reasons behind today’s market fall.

Major drivers of today’s market fall

According to stock market experts, the Indian stock market is falling due to the economic uncertainty surrounding the US economy ahead of Donald Trump’s second innings. FIIs’ selling, rising US bond yield, and investors’ cautious approach amid Q3 earnings are some of the major reasons that are dragging Dalal Street.

1] Economic uncertainty: “A second Trump administration could significantly reshape Asia’s economic landscape, particularly through its trade policies and protectionism. Countries like China, Japan, South Korea, and Vietnam, which rely heavily on US trade, could face challenges as the US prioritises American interests with tariffs and trade agreements. Trump’s “decoupling” from China could lead to shifts in production and sourcing strategies, with Southeast Asia—especially Indonesia, Malaysia, and Thailand—potentially benefiting from increased foreign investment as companies diversify their supply chains,” said Ross Maxwell, Global Strategy Operations Lead at VT Markets.

2] Cautious approach amid Q3 results season: “Investors are becoming cautious after the weak Infosys results and selling pressure in the banking space, despite the market estimating good Q3 numbers from the Indian banking space,” said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.

3] Soaring US dollar, bond yield: “As the US dollar continues to remain strong, US bond yield is also rising. This has triggered money swapping from equities and other assets to the currency and bond market in the US. This is also a reason for weakness in the Indian equity market,” said Anshul Jain.

4] FIIs’ selling: “Due to attractive prospects in the bond and currency market in the US, FIIs are continuously selling in the Indian markets. On the other hand, DIIs are not coming forward as they are waiting for the Union Budget 2025. This is also a reason for the continuous fall in the Indian stock market,” said Mahesh M Ojha, AVP — Research at Hensex Securities.

5] US Fed rate cut: “The market is selling due to the uncertainty around the US Fed rate cut. As the US Fed has signalled, it is not I hurry to cut down interest rates until inflation concerns are around. The US core inflation unexpectedly slowed, while headline consumer prices showed no significant upside surprises. So, there is uncertainty about the US Fed rate cut, which is also not allowing the DIIs to counter FIIs’ selling,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.

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