Investors lose ₹5L crore as Sensex crashes 700 points today
What's the story
The Indian stock market witnessed a major selloff on Tuesday, with the Sensex crashing nearly 700 points and the Nifty falling to near 24,750. The BSE Midcap and Smallcap indices also underperformed, falling up to 1.5% during the session. The overall market capitalization of BSE-listed firms fell from ₹455 lakh crore in the previous session to nearly ₹450 lakh crore today, making investors poorer by about ₹5 lakh crore.
Market influences
US tariff threat on Indian imports
Experts have identified five key factors behind the current market selloff. First, there are fears of a 50% tariff on Indian exports to the US as the August 27 deadline nears. The Trump administration has proposed this move in an effort to bring Russia to the negotiation table over its war in Ukraine.
Market dynamics
Mismatch between valuations and earnings
The high valuation of the Indian stock market is another major concern, with an earnings-valuation mismatch due to weak earnings. Shrikant Chouhan from Kotak Securities said, "There is a mismatch between valuations and earnings growth. Currently, we are at 19 times the FY27 earnings, which is on the expensive side." Further adding to this pressure are foreign institutional investors (FIIs) who have been relentlessly selling Indian stocks amid a largely stable US dollar and better investment opportunities in other markets.
External influences
Weak global cues and technical factors
Weak global cues have also affected domestic market sentiment. Japan's Nikkei and Korea's Kospi fell by about 1% each, following losses in key US indices after President Trump fired Federal Reserve Governor Lisa Cook over alleged mortgage loan misconduct. On the technical front, Anand James from Geojit Investments said that the Nifty sees profit booking as it nears the 25,000 mark. This could trigger a further decline if it falls below certain levels today.