The stock market fell by a significant margin on October 25, with benchmark indices Sensex and Nifty seeing severe falls. While the Sensex lost 663 points and the Nifty fell by 219 points, the overall capitalization of the market tumbled by nearly ₹6 lakh crore in a single day.
Not one, but various factors are responsible that are perturbing investors and market participants today. In this blog, we will discuss five core reasons behind why the Indian stock market is falling today.
Top Reasons Why Indian Stock Market is Falling Today
Here they are:
Foreign Investor Selloff
Foreign Portfolio Investors have been selling Indian equities at a very sharp pace. That has gone a good part of the way towards downing the current market. FPIs sold almost ₹98,000 crores worth of Indian stocks in October alone. There is such a huge outgo because valuations are more attractive in Chinese markets which have just recently witnessed stimulus measures.
This has resulted in a concentration of selling pressure out of India and, hence, experienced a considerable drop in the performance of Indian stock markets today.
Lousy Q2 Earnings
A lousier-than-expected earnings season for most of India’s giant groups also disappointed the market sentiments. Many corporations in finance and banking as well as consumer goods businesses earned not-so-good revenues and profits. They were short of the targeted analysts’ estimations.
For instance, the latest earnings report of IndusInd Bank resulted in the stock sliding down by 19%, and it spilt over into significant damage to the Sensex. A similar erosion of confidence has been witnessed among investors in terms of corporate earnings as a factor contributing to the Indian stock market.
Rising U.S. Bond Yields
Rising U.S. Treasury bond yields have put the Indian stock market under pressure as the recent yields in the country made American investments more attractive. U.S. 10-year Treasury yields have been hovering around a three-month high. That was pulling in investors who could otherwise park in the Indian markets. This flow of investor interest toward U.S. bonds driven by higher yields has provided the rationale for the outflow of funds from India, which explains why the Indian stock market is falling today.
Global Uncertainty Before Elections in United States
The uncertainty of the forthcoming U.S. presidential election has furthered the guarded mood in markets around the globe, including India. A too-close contest between Kamala Harris and Donald Trump has made markets sensitive. Any change in policies may ultimately reflect in the ongoing pattern of global trade and relationships.
Caution among investors is also at a high level, considering further imposition of tariffs or disruptions to trade if Trump is to return, which is adding to the ongoing trend of sliding India’s markets.
Persistent High Valuations
Indian equities still remain at lofty valuations relative to historic standards even after a series of corrections. The present valuation of Nifty is still too rich to generate fresh buying quantity and thereby investor confidence. Many investors feel that the market has not corrected enough to give a robust opportunity to buy, yet another reason why the Indian equity market continues to fall.
In a nutshell, the recent selling in Indian equities has been collectively catalysed by foreign selloffs, lousy earnings, high U.S. bond yields, geopolitical tensions, and expensive valuations. Keep an eye on the latest trends before making your next investment move.
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