Investors lose Rs 6 lakh crore amid market crash – How long will this continue?

The Indian stock market faced a sharp decline on Monday, erasing a staggering Rs 6 lakh crore in investor wealth. The Sensex and Nifty dropped nearly 1% amid global trade concerns, with market sentiment further rattled by a record-low rupee and heavy selling in metal stocks.

What Led to the Market Fall?

The BSE Sensex tumbled 704.40 points (-0.90%) to 77,155.79, while the NSE Nifty50 slid 226.90 points (-0.96%) to 23,333.05 around midday trading.

The primary trigger for the market slump was U.S. President Donald Trump’s announcement of fresh tariffs on steel and aluminum imports. A 25% tariff is set to be imposed, causing metal stocks to see massive selling pressure. Additionally, the Indian rupee hit an all-time low of 87.95 against the U.S. dollar, further dampening investor sentiment.

Foreign Investors Continue to Exit

Despite the Reserve Bank of India’s recent rate cut and tax-saving measures in the Union Budget, foreign investors continued to sell their holdings. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, highlighted that global economic concerns and high U.S. bond yields (above 4.4%) are prompting institutional investors to move funds out of Indian equities.

More Downside Ahead?

Market analysts are cautious about the short-term outlook. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that despite the BJP’s strong performance in the Delhi elections, the market lacks strong triggers for a sustained rally.

The recent depreciation of the rupee, combined with continued foreign investor outflows, adds to the uncertainty. Analysts at Nuvama Institutional Equities predict that the RBI may introduce further rate cuts but will proceed cautiously given global economic risks.

What Should Investors Do?

While the Sensex and Nifty have already corrected by 10-11% from their all-time highs, the BSE midcap and smallcap indices have dropped even further—by about 15% from their 52-week highs. Some stocks have seen a 50% drop from their peak values.

Experts advise investors to focus on high-quality largecap stocks, as they are likely to be more stable in the current market scenario. Motilal Oswal Financial Services (MOFSL) remains cautiously optimistic, stating that the BJP’s recent election victory may boost confidence. However, global uncertainties, including Trump's trade policies and persistent foreign investor selling, could keep the markets volatile.

Bottom Line

With multiple headwinds affecting the market, analysts suggest a cautious approach. While valuations remain high in certain sectors, any improvement in GDP growth, corporate earnings, or a change in global investor sentiment could provide the much-needed momentum for a recovery. Until then, investors are advised to tread carefully and focus on fundamentally strong stocks.