Sensex down 1,600 points in 4-days: Here we decode why
What's the story
The Indian stock market has witnessed a major downturn over the last four trading sessions. The benchmark index, Sensex, has plummeted by over 1,600 points or nearly 2%. Meanwhile, the Nifty 50 index has also seen a similar decline of nearly 2% during this period. Today alone, Sensex lost some 400 points to hit an intraday low, while Nifty fell by 0.5%. So, what are the reasons behind this decline? Let's see.
Global factors
Trade war impacts Indian market
The ongoing trade tensions between the US and its trading partners have affected the Indian market. US President Donald Trump's recent tariff policies, including a 30% levy on imports from Mexico and the European Union (EU), have raised concerns about a prolonged trade war. Experts warn that even if India secures a trade deal with the US, it may not be completely shielded from global economic turmoil.
Investor behavior
Shift in investor focus toward mid and small-cap stocks
The recent market downturn can also be attributed to a shift in investor focus from large-cap stocks to mid- and small-cap segments. This is mainly due to retail investors' expectations of a higher earnings recovery in these segments. G. Chokkalingam, the Founder and Head of Research at Equinomics Research Private Ltd, said that with over 4,000 small- and mid-cap stocks available, investors have plenty of opportunities for unique growth stories or deep-value plays.
Capital movement
Foreign capital outflow adds to pressure on benchmarks
Another factor contributing to the market downturn is foreign capital outflow. After four months of buying, foreign portfolio investors (FPIs) have started selling Indian equities. This trend is putting further pressure on benchmarks as FPIs usually have a higher ownership in large-cap stocks. Data shows that FPIs sold over ₹10,000 crore worth of Indian equities in the cash segment till July 11.
Market performance
Mid and small-cap stocks defy market trend
Despite slump in major indices, mid and small-cap segments have been performing well. The BSE Midcap and Smallcap indices rose by 0.5% during today's session. This indicates that while large-cap stocks are facing pressure, there is still some resilience in smaller companies on the market.