Sensex Down 900 Pts, Markets in Red for Sixth-Consecutive Day; 5 Key Factors Behind Today’s Fall

The Equity market continued their losing streak for the sixth consecutive session, amid mixed global cues leading to heightened selloffs. Sensex crashed by over 850 pts on February 12 from its previous day’s closing of 75,431, while Nifty tumbled at 22,815. BSE midcap and smallcap indices fell by 3% respectively.

In a nutshell, investors lost ₹8 lakh crore as BSE’s market capitalisation dropped from ₹408.5 lakh crore in the previous session to ₹400.5 lakh crore today.

Why is the stock market falling today?

1. Income Tax Bill

As per experts, the new income tax bill is leading to heightened selloffs in the market. Finance Minister Nirmala Sitharaman announced the new Income-Tax (I-T) Bill during the budget speech, which is likely to be tabled in the Lok Sabha on February 12.

It is believed that the government is set to levy higher tax rates on financial securities under the new I-T Bill.

Devarsh Vakil, Head of Prime Research, HDFC Securities said, “Unsubstantiated fears regarding higher tax rates on financial securities due to the implementation of the New Income Tax Bill also triggered panic selling among weak market participants. Some of the selling can be linked to margin calls on funded positions.”

2. U.S. Fed Chair Jerome Powell’s Hawkish Stance

While the market expected the Fed to slash the interest rates, the hopes were short-lived as the U.S. Fed Reserve Chair Jerome Powell reiterated the Central Bank’s stance on the interest rates during his testimony before Congress.

Amid inflation and a strong job market, the central bank is not under any pressure to cut the interest rates in the near future, Powell said.

3. FPI Selloff

Surging FPI selloffs have dampened the market sentiments. FPIs have dumped Indian stocks close to ₹2.8 lakh crore since October.

Several factors including stretched valuation of the Indian stock market, weak Q3 earnings, declining rupee and stronger US dollar have collectively led outflows of foreign capital

4. Uncertainty over levy of tariffs

U.S. President Donald Trump vowed to impose tariffs on imports of steel and aluminium, which in turn led to a selloff in the current market. Markets are concerned about a possible all-out trade war amid the imposition of tariffs on key supplies.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “Trump’s tariff tantrums have impacted the markets for several days. Trump's move away from targeting specific countries like Mexico, Canada, and, to a lesser extent, China and moving to import tariffs on steel and aluminium in all countries has aggravated the concerns. The European Union’s declaration that they will retaliate with counter-tariffs has raised the probability of a full-blown trade war. How this will pan out remains to be seen,”

5. Weak Q3 earnings

India Inc reported poor Q3 numbers since the last three quarters leading to sharp selloff among foreign investors. With sluggish earnings in place, the equity market is struggling to sustain elevated valuations.

Varun Fatehpuria, the founder and CEO of Daulat Finvest Private Limited said, “While robust earnings growth previously justified their multiple re-rating, the recent slowdown in earnings is leading to a partial moderation of these elevated valuations.”