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Sensex Crashes Over 700 Points Today – Here’s Why

Indian stock market faced a sharp decline as Sensex dropped over 700 points and Nifty slipped below 23,250. Investors lost nearly ₹5 lakh crore due to weak global cues, rising dollar index, and continued foreign investor selloff

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Sensex Crashes Over 700 Points Today – Here’s Why

The Indian stock market faced sharp losses on Monday, February 3, as weak global trends triggered heavy selling. The Sensex tumbled over 700 points, while the Nifty 50 dropped below 23,250.

Sensex and Nifty Open Lower

The Sensex started the day at 77,063.94, down from its previous close of 77,505.96. It quickly fell further to 76,791.09, losing over 700 points. Similarly, the Nifty 50 opened at 23,319.35, compared to its last close of 23,482.15, and dropped to 23,246.55.

Mid and small-cap stocks suffered even more. The BSE Midcap and Smallcap indices fell over 1% each.

By 11:15 AM, the Sensex had recovered slightly but was still down 418 points (0.54%) at 77,100. The Nifty 50 remained 160 points lower (0.64%) at 23,337.

Market capitalization of BSE-listed firms fell from ₹424 lakh crore in the previous session to ₹419 lakh crore. Investors lost nearly ₹5 lakh crore in a single day.

Why Is the Market Falling?

Experts point to five major reasons behind the downturn.

1. Weak Global Trends

Global markets struggled after US President Donald Trump announced new tariffs on Canada, Mexico, and China. Japan’s Nikkei and Korea’s KOSPI fell 3% each.

“Despite an excellent budget, the market will be under pressure from the Trump tariffs and the heightened global uncertainty that these ‘initial rounds of tariffs’ have triggered,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

2. Trump’s Tariffs Shake Market Sentiment

Trump imposed 25% duties on imports from Canada and Mexico and a 10% tariff on Chinese goods. Experts fear this could escalate into a full-blown trade war.

“The 25% tariffs imposed on Mexico and Canada are meant to punish them for issues like immigration and illicit fentanyl trade. Trump may use tariffs against other countries again for non-trade issues,” said Vijayakumar.

China responded cautiously, choosing to take the matter to the WTO instead of retaliating immediately.

3. Dollar Strengthens, Rupee Hits Record Low

The Indian rupee fell to a record low, breaching 87 per US dollar for the first time. Meanwhile, the US dollar surged after Trump’s tariff announcement.

“The spike in the dollar index above 109.6 will trigger more selling by FIIs (foreign institutional investors), putting the market under pressure,” Vijayakumar noted.

4. Uncertainty Over RBI’s Policy Decision

With the Union Budget behind, investors are now waiting for the Reserve Bank of India’s (RBI) upcoming Monetary Policy Committee (MPC) meeting.

Finance Minister Nirmala Sitharaman announced tax reforms to boost consumption. Experts believe the RBI might cut interest rates by 25 basis points to support economic growth. However, uncertainty around this decision is making investors cautious.

5. FIIs Continue Selling Indian Stocks

Foreign institutional investors (FIIs) have been offloading Indian stocks since October 2024, weighing down market sentiment.

Between October 1, 2024, and February 1, 2025, FIIs sold nearly ₹2.7 lakh crore worth of Indian equities. High stock valuations, weak corporate earnings, and rising US bond yields have driven FIIs away, further pressuring the market.

The Indian stock market faces multiple challenges, including global trade tensions, FII outflows, and policy uncertainties. Investors should brace for continued volatility in the coming weeks.

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