Stock market crash: Indian equities were under considerable selling pressure on Friday, January 17, led by a dramatic sell-off in banking and IT sectors, causing the leading indices to close the session down, snapping their three-day gain run.
The sell-off may have been more severe if heavyweights like Reliance Industries and ITC, as well as a few metal and pharmaceutical stocks, had not supported the markets, allowing the frontline indices to recover some of their earlier losses.
In this context, the Nifty50 down 0.47% to 23,203, while the Sensex closed at 76,624, down 0.54% from its previous level. For the fourth consecutive trading day, the broader market outperformed the front-line indices and ended in the green. The Nifty Midcap 100 index increased 0.23% to 54,607, while the Nifty Smallcap 100 index finished the day up 0.16% at 17,672.
Axis Bank's dismal set of figures brought major banking stocks down, while Infosys' results pulled down the whole IT pack. Although Infosys' Q3FY25 results met analysts' expectations, questions were expressed regarding the quality of earnings.
Morgan Stanley remarked that revenue increase was driven by a greater proportion of "third-party items" in the deal pipeline, raising worries about the integrity of the results. Infosys and Axis Bank were the biggest losses in today's session, with the former losing 6% of its value and the latter falling by 4.5%. Overall, 21 Nifty 50 members concluded the session with losses.
Reliance Industries shares closed nearly 3% higher, followed by BPCL, Hindalco, Coal India, Nestle India, and Bharat Electronics, all of which gained 2% to 2.5%. Asian Paints ended the session up 2.1%, snapping a five-day losing trend.
In terms of sectoral performance, Nifty IT was the biggest loser, down 2.68%, followed by Nifty Private Bank, which fell 2.17%. Nifty Oil & Gas was the top performer, gaining 1.6%, followed by Nifty Realty, Nifty Infra, Nifty Energy, Nifty Metal, and Nifty FMCG, all of which gained more than 1%. Aside from bad earnings from large firms, experts cited the following important causes for today's market decline.
Major Causes of Today's Market Decline
According to stock market experts, the Indian stock market is plunging as a result of economic uncertainty in the United States ahead of Donald Trump's second innings. FIIs' selling, rising US bond yields, and investors' cautious posture ahead of Q3 earnings are some of the primary factors depressing Dalal Street.
1. Economic Uncertainty: "A second Trump administration might dramatically alter Asia's economic landscape, particularly through trade policy and protectionism. Countries that rely largely on US commerce, such as China, Japan, South Korea, and Vietnam, may experience difficulty as the US prioritises American interests through tariffs and trade deals. Trump's "decoupling" from China may result in shifts in production and sourcing strategies, with Southeast Asia—particularly Indonesia, Malaysia, and Thailand—possibly benefiting from increased foreign investment as companies diversify their supply chains," said Ross Maxwell, Global Strategy Operations Lead at VT Markets.
2. Cautious Approach during Q3 Results Season: "Investors are becoming cautious after the weak Infosys results and selling pressure in the banking space, despite the market estimating good Q3 numbers from the Indian banking space," said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.
3. Soaring US Dollar & Rising Bond Yield: "As the US currency strengthens, so does the yield on US bonds. This has caused money to flow from equities and other assets to the US currency and bond markets. This is also a source of weakness in the Indian equity market," added Anshul Jain.
4. FIIs' Selling: "Due to excellent prospects in the US bond and currency markets, FIIs are constantly selling in Indian markets. However, because they are awaiting the Union Budget 2025, DIIs are not stepping forward. The Indian stock market's ongoing decline can also be attributed to this, according to Mahesh M. Ojha, AVP of Research at Hensex Securities.
5. US Fed Rate Cut: Because of the uncertainties around the US Fed rate drop, the market is selling. The US Federal Reserve has indicated that it is not in a rush to lower interest rates unless inflation worries are resolved. Core inflation in the US surprisingly slowed, but there were no notable positive surprises in headline consumer prices. According to Avinash Gorakshkar, Head of Research at Profitmart Securities, "there is uncertainty regarding the US Fed rate cut, which is also not allowing the DIIs to counter FIIs' selling."
