₹6 Lakh Crore Erased: Why Did the Indian Stock Market Fall Sharply?

Stock market crash: Following weak global trends, the Indian equity market witnessed sharp selling pressure on Friday. The Nifty 50 began the session on a negative note at 25,571 and touched an intraday low near 25,505, declining close to 300 points. Meanwhile, the BSE Sensex opened at 82,902 and quickly slipped to around 82,714, losing more than 900 points in early trade.

The Bank Nifty also remained under pressure, falling over 500 points to trade near 60,233.

Amid this broad-based decline, the total market capitalisation of BSE-listed companies dropped from nearly ₹472 lakh crore to about ₹466 lakh crore, resulting in an intraday wealth erosion of approximately ₹6 lakh crore.

According to market experts, the primary trigger behind the weakness was the sharp decline in IT stocks driven by concerns related to artificial intelligence. The IT sector carries roughly 10% weight in benchmark indices, which amplified the impact of the sell-off.

Apart from this, cautious sentiment ahead of US inflation data, profit-taking after the recent rally linked to the India-US trade agreement, and fluctuations in the Indian rupee against the US dollar further dragged the indices lower.

Why Did the Indian Stock Market Decline Today?

Explaining the fall, Avinash Gorakshkar, a SEBI-registered fundamental equity analyst, stated that the correction was largely influenced by weakness in US markets. He noted that investors remained cautious ahead of the US Consumer Price Index (CPI) data, as uncertainty surrounding the US economy has increased risk aversion.

He further added that the recent upmove following the India-US trade deal announcement encouraged investors to book profits. In addition, pressure on the rupee and expectations of subdued quarterly earnings contributed to the overall market decline.

Top 5 Reasons Behind the Market Crash

1) Sharp Fall in IT Stocks

Indian IT counters dropped as much as 7.5%, extending losses for the third consecutive session. The decline mirrored overnight weakness in US technology shares, amid fears that AI-led disruption could affect labour-intensive IT services and impact future deal inflows.

IT majors such as Infosys and Tata Consultancy Services emerged as key contributors to the Sensex’s fall.

Experts highlighted that with IT stocks accounting for nearly one-tenth of the Nifty 50’s weightage, continued selling in the sector significantly pulled down benchmark indices.

2) Focus on US CPI Data

Investors are closely watching US inflation figures scheduled for release later in the day, as the data could provide clarity on the interest rate outlook of the Federal Reserve.

Stronger US employment data in January has already reduced expectations of an early rate cut. Higher-for-longer interest rates in the US generally create challenges for emerging markets like India.

Since the CPI numbers will be announced after Indian market hours and markets remain closed over the weekend, traders avoided carrying aggressive positions.

3) Profit-Booking After India-US Trade Deal Rally

Indian benchmark indices had rallied strongly in the first week of February on optimism surrounding the India-US trade agreement. Both Sensex and Nifty gained over 1.5% during that period.

Following the sharp rise, some investors chose to lock in gains, leading to profit-booking pressure in the latest session. Analysts believe the actual economic benefits of the trade deal may take several months to materialise.

4) Strategic Concerns Around Trade Relations

Experts also pointed out that India’s export exposure to both the US and China presents a balancing challenge, particularly at a time when global trade tensions remain elevated. Markets tend to react swiftly to such strategic uncertainties.

5) Rupee Volatility

Although foreign institutional investors (FIIs) have recently shown renewed interest in Indian equities, volatility in the Indian rupee remains a risk factor. Even minor depreciation can impact overseas investor sentiment.

What’s Next for the Market?

Despite the sharp correction, analysts maintain that the medium- to long-term outlook for Indian equities remains structurally positive, supported by strong domestic fundamentals and stable macroeconomic indicators. However, given global uncertainties, investors are advised to follow a phased investment approach rather than aggressive lump-sum buying.