The Indian stock market has experienced a significant downturn in the past two days, with the Sensex falling over 1000 points and the Nifty 50 dropping below 25,400. This decline reflects cautious investor sentiment amid various global and domestic uncertainties.
Market Performance
On January 20, 2026, the Sensex fell over 650 points, reaching an intraday low of 82,568, a 0.80% decrease. The Nifty 50 also breached the 25,400 level, falling to 25,350 during intraday trading. Both the BSE Midcap and Smallcap indices experienced declines of over 2%. This continues a trend from the previous day, where the BSE Sensex closed about 0.4% down. In the past two sessions, the Sensex has shed more than 800 points, while the Nifty 50 has fallen over 1%. The Nifty 50's intraday low was 25,405.
Key Reasons Behind the Decline
Several factors have contributed to this market downturn:
- Global Trade Tensions: Intensifying geopolitical tensions and the United States' recent trade stance on Europe, including threats of tariffs, have created uncertainty. The European Union may retaliate with tariffs on US goods if the US follows through with its threats which often triggers volatility and prompts investors to reduce exposure to riskier assets.
- Mixed Corporate Earnings: The Q3 results have presented a mixed picture, with stable earnings but a lack of significant positive surprises. While some sectors, like automobiles, have shown growth, the market has not experienced a broad-based earnings boost. Disappointing results from major companies like Reliance Industries and ICICI Bank have also added to the selling pressure.
- FII Selling Pressure: Foreign institutional investors have been consistently selling Indian equities, adding to the downward pressure. January outflows in the cash segment have exceeded ₹29,000 crore, reflecting concerns about trade deals, currency fluctuations, and valuations. On January 8, FIIs sold shares worth Rs 3,367.12 crore, marking the fourth straight session of net selling.
- Flight to Safe-Haven Assets: Heightened global and domestic risks have encouraged investors to move towards safer investments. Gold and silver have seen record-breaking rallies, prompting some investors to book profits from equities and shift funds to precious metals.
- Union Budget Anticipation: With India's Union Budget 2026 approaching, DIIs are waiting for more clarity from the government, especially after recent election results. Expectations are high that the government will announce measures to accelerate economic growth, job creation, and consumer demand.
- Trump's Greenland Tariff Threat: Sentiment was negatively affected after U.S. President Donald Trump threatened to impose new tariffs on eight European countries unless Washington is allowed to buy Greenland.
Additional Factors
Other factors contributing to the market decline include concerns about stretched valuations, erratic US trade policy, lack of fresh triggers, and rising crude prices. Geopolitical risks, such as the Russia-Ukraine war and developments in Venezuela, have also played a role.
Investor Sentiment
The market's weakness is reflected in the broad-based selling across sectoral indices, signaling weak risk appetite. Realty, IT, and mid- and small-cap segments are under pressure, reflecting growth and valuation concerns. Investors are advised to closely monitor market developments and consider consulting with financial advisors.
