Sensex drops 250 points, Nifty 50 ends below 25,750— What drove the Indian stock market down? Explained

A day after snapping their five-day losing streak, the Indian stock market benchmarks, the Sensex and the Nifty 50, resumed their downward march on Tuesday, January 13, amid profit booking due to persisting concerns over US tariffs, foreign capital outflow, and mixed global cues.

The 30-share pack Sensex crashed over 600 points, or 0.73%, to hit an intraday low of 83,262.79, while the NSE counterpart Nifty touched an intraday low of 25,603.30, falling 0.72%.

Finally, the Sensex ended 250 points, or 0.30%, down at 83,627.69, while the Nifty 50 settled at 25,732.30, down 58 points, or 0.22%. The BSE Midcap index slipped 0.16%, but the Smallcap index strongly outperformed, rising 0.46%.

Eternal, ICICI Bank, and Tech Mahindra ended as the top gainers in the Sensex index, while Trent, Larsen and Toubro, and Reliance ended as the top laggards.

What drove the stock market down?

Let's take a look at five key factors behind the market's fall:

1. US tariffs remain a key headwind

Even as expectations of a trade deal between India and the US have grown stronger following comments from the US’s new ambassador to India, Sergio Gor, market sentiment remains cautious due to uncertainty over the timeline. Gor said that the next call on trade will take place on Tuesday,

However, media reports suggested that no formal trade discussions are scheduled this week.

Business Today reported, quoting news agency Informist, that no India-US trade talks are planned for this week.

Meanwhile, US President Donald Trump's tariff tantrums show no sign of abating, as he has threatened that any country that does business with Iran will face a 25% tariff.

"Trump’s weaponisation of tariffs has already impacted global trade and particularly countries which have been targeted with penal tariffs. Trump’s latest declaration that the US will impose 25% tariffs on countries doing trade with Iran clearly sends out the message that this policy of weaponisation of tariffs will continue," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.

Akshat Garg, Head of Research and Product at Choice Wealth, noted that the proposed 25% tariff is a secondary trade measure intended to pressure countries that continue to engage in commercial activities with Iran.

"It is separate from existing duties and, if implemented as an additional levy, could be stacked on top of prevailing tariffs. For countries already facing 50% duties, this would significantly raise the effective trade cost, potentially pushing total tariffs to very high levels," Garg said.

"The intent is not just economic but strategic—raising the price of non-compliance with U.S. foreign policy. Such measures can disrupt global supply chains, increase costs for importers, and heighten geopolitical and trade tensions across regions," Garg added.

2. Jump in crude oil prices

Crude oil prices jumped more than a per cent on escalating US-Iran conflict. Iran is one of the biggest oil producers of OPEC.

While the country is facing its biggest anti-government demonstrations in years, the US President has warned of a possible military action against it over the lethal violence against protesters.

Rising crude oil prices are detrimental to the Indian economy, as the country is one of the world's largest importers of crude oil. A sustained rise in crude oil prices can distort India's tarde balance and fiscal health.

3. Relentless foreign capital outflows

Foreign institutional investors have been continuously selling Indian stocks since July last year.

In the cash segment, FIIs have sold off Indian stocks worth over ₹15,000 crore so far in January (till the 12th). From July to December last year, FIIs cumulatively sold off Indian stocks worth nearly ₹1.85 lakh crore.

4. Mixed Q3 earnings

The Q3 earnings season has started on a mixed note. IT majors TCS and HCL Tech failed to meet Street expectations. The focus is now on the December quarter results of Infosys and Reliance this week.

While experts expect a healthy Q3 performance, if the actual numbers fail to meet expectations, the domestic market may experience a prolonged period of underperformance.

5. Caution ahead of Budget 2026

While investors expect the government to maintain its pro-growth policies, there are speculations that the government's focus on fiscal consolidation might restrict growth spending.

"Investors should be cautious about certain significant risks, such as the impact of global factors such as the volatility of crude oil prices, geopolitical developments, and global interest-rate trends, along with a sharper focus on fiscal consolidation that might restrict growth spending and unknown changes in capital market or capital gains taxation," said Ravi Singh, Chief Research Officer at Master Capital Services.

"Although budget announcements are bound to cause short-term volatility, the medium-term direction of the market will depend on the extent to which the Budget maintains a balance among growth support, fiscal restraint, and policy stability," said Singh.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.