Introduction

Stock Market Crash: Equity investors witnessed a massive erosion of wealth amounting to ₹16.97 lakh crore over five consecutive sessions of market decline. The steep fall was triggered by persistent foreign fund outflows and renewed trade war concerns following fresh US tariffs. 

Over this period, the BSE benchmark index tumbled 2,290.21 points or 2.91%, with Tuesday marking the fifth consecutive session of losses. On that day alone, the Sensex plunged 1,018.20 points or 1.32%, closing at a two-week low of 76,293.60. 

The weak sentiment across equities resulted in the total market capitalization of BSE-listed firms shrinking by ₹16,97,903.48 crore to ₹4,08,52,922.63 crore (USD 4.70 trillion).

Heavy Sell-Off Across Sectors

The sell-off was broad-based, with all sectoral indices ending in the red. Realty stocks took the biggest hit, declining 3.14%, followed by industrials (2.87%), consumer discretionary (2.73%), capital goods (2.59%), auto (2.49%), and metals (2.23%). 

Among the 30 Sensex stocks, Zomato plummeted over 5%, while Tata Steel, Bajaj Finserv, Power Grid, Larsen & Toubro, Tata Motors, Kotak Mahindra Bank, Hindustan Unilever, and ITC also suffered sharp losses. Bharti Airtel was the sole gainer. The broader market also reflected weakness, with the BSE smallcap index plunging 3.40% and the midcap index falling 2.88%.

Why is the Stock Market Going Down?

1. US Steel and Aluminium Tariff Increase

On Monday, US President Donald Trump announced a uniform 25% tariff on steel and aluminum imports, eliminating all country-specific exemptions and quota arrangements. This policy, set to take effect on March 4, aims to support struggling domestic industries but raises concerns over a potential global trade conflict. The tariff will apply to imports from Canada, Brazil, Mexico, South Korea, and other previously exempted nations.

“It’s 25% without exceptions or exemptions. That’s all countries, no matter where it comes from,” Trump stated, emphasizing the uniform tariff structure. Market analysts predict a prolonged weakness in metal prices due to this decision. “Trump’s latest move will impact countries like Mexico, Brazil, South Korea, and Vietnam the most. Metal prices are expected to remain soft for an extended period,” said Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

2. Market Anxiety Before Powell’s Address

Investors remained cautious ahead of Federal Reserve Chair Jerome Powell’s address to the Senate Banking, Housing, and Urban Affairs Committee. Market participants closely monitored his remarks on tariffs and inflation for any indications of potential shifts in US monetary policy, adding to the prevailing uncertainty.

3. Ongoing Foreign Investment Outflow

Foreign institutional investors (FIIs) continued their selling spree, withdrawing $9.94 billion from Indian equities this year, according to NSDL data. The sustained capital outflows have added significant pressure on domestic market performance, contributing to the sharp decline.

4. Rising Yields and Currency Impact

The US bond market saw a surge in yields, with the 10-year Treasury yield reaching 4.495% and the 2-year yield at 4.281%. Meanwhile, the dollar index stood firm at 108.36, strengthening the US currency. This has led to increased capital outflows from emerging markets, including India, as investors seek safer, higher-yielding assets. 

The rising US bond yields have made American investments more attractive, while the stronger dollar has escalated overseas capital expenses, further dampening market sentiment.

Experts Weigh In on the Market Slump

Market analysts attributed the sharp correction to escalating trade tensions, economic uncertainty, and sustained selling by Foreign Institutional Investors (FIIs). 

“Indian markets underperformed global indices as benchmark indices plunged over 1 percent each on widespread selling, mainly ignited by worries over escalating tariff war,” noted Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd. 

Vinod Nair, Head of Research at Geojit Financial Services, highlighted the strain on mid and small cap stocks, stating, “The ongoing uncertainty surrounding US trade policies and tariffs, coupled with domestic economic growth concerns and persistent FII selling, is dampening market sentiment. The mid and smallcap stocks experienced significant declines due to demand concerns and higher valuations.” 

The overall breadth of the market remained weak, with 3,478 stocks declining, 525 advancing, and 94 remaining unchanged on the BSE.

Investor Sentiment and Psychological Impact

A stock market crash today often triggers a wave of fear and uncertainty among investors, leading to panic selling and significant financial losses. The sudden and steep decline in the Indian stock market over the past few days has fueled anxiety, with many investors liquidating their holdings to prevent further damage. 

This reaction is not unique to India global markets have also been affected, with concerns over a potential US stock market crash adding to the already fragile sentiment. When markets witness rapid declines, psychological biases come into play, often exacerbating the downturn.

One of the key reasons behind heightened investor anxiety is loss aversion a behavioral tendency where individuals feel the pain of losses more intensely than the joy of gains. This leads to knee-jerk reactions, such as selling stocks at a loss instead of holding onto fundamentally strong assets for long-term recovery. 

The current stock market downturn has seen retail investors exit the market in large numbers, fearing further declines. Institutional investors, particularly Foreign Institutional Investors (FIIs), have also pulled out substantial funds, adding to the downward pressure.

The impact of a stock market crash extends beyond financial losses it affects investor confidence and economic stability. A sharp drop in equity valuations can erode wealth, reduce consumer spending, and create uncertainty about future investments. Many retail investors who entered the markets during bullish phases often lack the experience to navigate volatility, leading them to exit the market prematurely. 

Experts advise investors to stay calm, avoid panic selling, and focus on long-term strategies to ride out market downturns. Historically, markets have always rebounded from crashes, making patience and strategic decision-making crucial in turbulent times.

In Short!

The recent share market crash has wiped out significant investor wealth, driven by US steel and aluminum tariff increases, foreign investment outflow, and rising bond yields. While the stock market crash USA has added to global uncertainty, domestic factors like policy concerns and economic outlook have also contributed to Why is Nifty falling. The market fall today serves as a reminder that volatility is an inherent part of investing. 

Instead of reacting impulsively, investors should focus on long-term strategies, diversification, and market fundamentals. 

How do you navigate such downturns do you hold, buy the dip, or exit the market? Stay updated!