Sensex declines 900 points: Key reasons behind today's drop
What's the story
The Indian stock market witnessed a major plunge on Tuesday as the Sensex and Nifty continued their losing streak for the third straight session. The Sensex dropped nearly 900 points from its day's high after starting on a positive note. At 3:10pm, it was down by 888 points or 1.08% at 81,171 while the Nifty slipped below the key mark of 24,700, down 1% at 24,672.
Market overview
Market breadth turns negative amid sector-wide decline
The market breadth turned negative as around 1,103 shares advanced while 2,353 shares declined and 114 remained unchanged. Auto and financial stocks led the decline with Eicher Motors, Hero MotoCorp, Maruti Suzuki, Cipla and Shriram Finance among the top drags on the indices. All major sectors were trading in red at this time.
Market factors
Weak global cues and FII selling impact market sentiment
Weak global cues and FII selling were among the key factors that weighed on investor sentiment. Asian markets were mostly in red, tracking weakness in Wall Street Futures. South Korea's Kospi was down while US Futures also signaled a soft start due to the Federal Reserve's hawkish commentary. FIIs also sold shares worth ₹526 crore on Monday, contributing to the market downturn.
Market concerns
Japanese bonds and trade talks add to market uncertainty
A sharp fall in Japanese bonds raised fresh concerns over the country's fiscal situation, with the 20-year bond yield surging to its highest level since 2000. Further, uncertainty over India-US trade talks added to market volatility. Commerce Minister Piyush Goyal's visit ended without a confirmed trade deal before US tariffs kick in later this month.
Economic impact
Rising global trade tensions and rupee depreciation
Rising global trade tensions are also weighing on market sentiment. US Treasury Secretary Scott Bessent recently warned of possible tariff hikes on key trading partners, reviving fears of a global slowdown and triggering sharp volatility in risk assets. The Indian rupee fell by 13 paise to ₹85.55 against the US dollar on weak domestic equities and continued foreign fund outflows.
Global concerns
Moody's downgrade and COVID-19 surge affect investor sentiment
Global ratings agency Moody's downgraded the outlook on US sovereign debt over concerns of long-term fiscal discipline. This has further fueled risk-off sentiment across the globe. "This downgrade has created an undercurrent of unease in financial markets," said VK Vijayakumar from Geojit Financial Services. A spike in COVID-19 cases across major Asian cities such as Hong Kong and Singapore has also made investors cautious, further weighing on market performance.