Sensex crashes over 600 points, Nifty 50 nears 25,150— Why is the stock market down ahead of the Economic Survey 2026?

The Indian stock market witnessed a strong selloff in the morning session on Thursday, January 29, on profit booking amid elevated geopolitical risks, even as investors awaited the Economic Survey of India- an annual document that reviews the country's economic performance over the past financial year and also offers a policy outlook for the future.

The 30-share pack Sensex crashed over 600 points, or 0.80%, to an intraday low of 81,707.94, while the Nifty 50 also dropped by 0.70% to its day's low of 25,159.80.

The market was witnessing a broad-based selloff, with the mid- and small-cap indices on the BSE also falling by up to 0.70%.

Investors lost over ₹3 lakh crore within the first hour of the session, as the overall market capitalisation of BSE-listed firms stood at ₹456.3 lakh crore around 10:15 am on Thursday, compared to ₹459.5 lakh crore in the previous session.

Why is the stock market down?

1. Rising US-Iran tensions

The spectre of geopolitical tensions spooked investors. Iran has warned that it will give a strong response to the US military action against it after US President Donald Trump threatened that Tehran did not have much time left for negotiation over its nuclear programme and avoid possible American military action.

Iran warned it would respond to any US attack “like never before” as the US military forces build up steadily in the Gulf.

The evolving scenarios are keeping investors nervous, as a war between the US and Iran could inflate fuel prices, raise inflation, and derail global economies and the stock market.

2. Rupee hits record low

The Indian rupee hit an all-time low of 92 against the US dollar in early trade on Thursday amid continued foreign capital outflows, a sharp jump in crude oil prices, and heightened geopolitical uncertainties.

Rupee's acute weakness against the US dollar may aggravate foreign capital outflows from the Indian stock market at a time when foreign institutional investors (FIIs) have already been in a selling mode since July last year.

3. Crude oil prices jump

Benchmark Brent Crude jumped almost 2% to hover near the $70 per barrel mark, putting pressure on the domestic market sentiment.

Escalating tensions between the US and Iran suggest crude oil prices may rise further and remain elevated for a longer period.

India is one of the largest importers of crude oil globally. A prolonged period of elevated crude oil prices may strain India's fiscal maths, further weaken the currency, drive up inflation, dent the country's growth prospects and drag corporate profitability.

4. Caution ahead of the Budget 2026

Investors also appear cautious ahead of the Union Budget amid speculation that the government may not announce major measures to boost consumption, while a tax tweak is seen as unlikely.

This has left the market without fresh positive triggers to move higher and sustain recent gains.

"We expect the Budget to be a low-impact event for Indian equities. Growth stimulus is already in play, and the space for further positive impulses is limited," said brokerage firm Emkay Global.

"Some further reforms may be announced, but most possible measures are slow-burning and carry only a long-term impact. We expect positive outcomes for railways, defence, auto ancillaries, and EMS, while jewellery, life insurance, and housing finance may take marginal hits. We remain constructive on the broader markets for CY27, but the short-term pressures on the rupee need to abate before the commencement of the next bull run," Emkay said.

5. FIIs selling

The selloff of Indian stock by FIIs remains a key concern behind the market's subdued performance over the last year. Every month since July last year, FIIs have relentlessly sold Indian stocks in the cash segment. In January so far, they have sold off Indian stocks worth over ₹43,000 crore in the cash segment. In the previous session, they bought Indian stocks worth ₹480.26 crore, but experts warn that they have been selling on the rise.

"It is important to note that there is no change in the short to medium-term strategy of FIIs, which is ‘sell India’ and move the money to other performing markets. Therefore, unless there is some big announcement in the Budget nudging FIIs to return to India, they will continue to sell in India, thereby dragging the market down," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

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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.