Why Is The Stock Market Down Today?
Investor sentiment has been rattled by geopolitical tensions and renewed US-China trade disputes.
India’s stock markets opened deep in the red on Monday, 2 June, with the BSE Sensex dropping 732.71 points to 80,718.30 and the NSE Nifty50 down by 197.45 points to 24,553.25, despite upbeat GDP data showing 7.4 per cent growth in Q4 of FY25. The early plunge reflects investor anxiety over escalating global trade tensions and doubts about the sustainability of corporate earnings growth.
The decline came as a surprise to many, especially following India’s better-than-expected GDP numbers released last week. Analysts, however, say broader macroeconomic uncertainties are outweighing domestic economic strength.
Key Reasons Behind the Stock Market Decline
| Reason | Details |
|---|---|
| 1. Global Trade Tensions | Renewed US-China trade friction, triggered by President Trump’s announcement of 50 per cent tariffs on steel and aluminium, raised fears of a prolonged trade war. |
| 2. Accusations Against China | Trump accused China of violating a trade agreement, intensifying uncertainty in global markets. China rejected the claims as “bogus” and “unreasonable”. |
| 3. Investor Risk Aversion | Heightened geopolitical uncertainty led to a “risk-off” sentiment among investors, pushing them away from equities. |
| 4. Corporate Earnings Concerns | Despite positive GDP figures, investors remain cautious about the lack of visible corporate earnings growth in key sectors. |
| 5. Ukraine-Russia Conflict Fears | Escalating tensions between Ukraine and Russia further contributed to global market nervousness. |
| 6. Technical Weakness | According to technical analysts, repeated rejection at higher levels indicates poor market momentum, suggesting difficulty in sustaining upward moves. |
| 7. Volatility Spike in Broader Markets | Alongside benchmarks, mid-cap and small-cap indices also witnessed increased volatility, reinforcing bearish sentiment. |
| 8. Awaiting Policy Clarity | Investors are looking for more clarity on interest rate policy and global trade alignments before taking fresh long positions. |
“President Trump’s 50 per cent tariffs on steel and aluminium is a clear message that the tariff and trade scenario will continue to be uncertain and turbulent. This headwind will impact markets,” Vijayakumar noted.
Despite the negative global cues, India’s domestic economic indicators remain solid. “The tailwinds are getting stronger with the latest Q4 GDP growth data coming at 7.4 per cent, which is much better-than-expected,” said Vijayakumar. “Trends in consumption expenditure and capital expenditure are promising,” he added, while cautioning that weak corporate earnings may limit immediate upside.
Looking ahead, while macroeconomic indicators suggest robust growth prospects for FY26—with low inflation and potential interest rate cuts—analysts caution that global market dynamics and earnings visibility will determine the sustainability of India’s bull run.