Stock market crash: Nifty 50 drops below 25,500, Sensex sheds 2,900 points in 6 days; why is Indian stock market down?

Stock market crash: The Indian stock market remained in the bear grip for the sixth consecutive session on Monday, January 12, on rising geopolitical risks, concerns over US tariffs, and relentless foreign capital outflow.

The Sensex crashed over 700 points, or nearly 1%, to an intraday low of 82,861, while the Nifty 50 dropped to 25,473 during the session on Monday, falling by almost 1%.

Over the six consecutive sessions, the Sensex has tanked over 2,900 points, or more than 3%, while the Nifty 50, too, has shed more than 3%.

Investors' wealth has been eroded by more than ₹18 lakh crore in these six sessions, as the overall market capitalisation of BSE-listed firms dropped to nearly ₹463 lakh crore from over ₹481 lakh crore in January 2.

Why is the stock market down?

Here are five major factors that are behind the sharp selloff in the Indian stock market:

1. Concerns over the US tariffs

While a trade deal between India and the US remains elusive despite several rounds of talks, the market is nervous that the US may increase tariffs on Indian goods to as much as 500% if the Russia sanctions bill, the Sanctioning of Russia Act of 2025, is passed.

On January 7, Republican Senator Lindsey Graham said that Trump had backed the Russia sanctions bill, which could raise US tariffs to at least 500% on countries that buy Russian oil.

Experts say that if the bill becomes a US law, it will be a significant blow to India, which is already facing a steep 50% tariff.

"The drama surrounding the US-India trade deal is getting murkier with strange remarks from the US administration. This is impacting the market," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

2. Persistent foreign fund outflows

Foreign institutional investors have been continuously selling Indian stocks since July last year due to a growth-valuation mismatch, the rupee's weakness, and US tariffs on India.

In the cash segment, FIIs have sold off Indian stocks worth nearly ₹12,000 crore so far in January (till the 9th). From July to December last year, FIIs cumulatively sold off Indian stocks worth nearly ₹1.85 lakh crore.

Foreign capital outflow is one of the biggest reasons behind the underperformance of the Indian stock market. Experts say an India-US trade deal and healthy earnings growth will bring back FIIs to the Indian stock market.

"It appears that if FIIs are to turn buyers in India, sentiments have to improve with positive developments on the US-India trade agreement and uptick in earnings growth,” said Vijayakumar.

3. Increased geopolitical risks

Evolving geopolitical situations have dealt a significant blow to investors' risk appetite. The recent US-Venezuela conflict, Trump's aggression over Greenland and his tone over Iran have raised geopolitical risks.

"Geopolitical developments in Venezuela, the crisis in Iran and Trump’s threats regarding Greenland are being viewed by the markets with concern," Vijayakumar said.

4. Money flowing to safe haven assets

Amid increased geopolitical risks, investors are rushing towards safe-haven assets, selling riskier equities in anticipation of further falls.

MCX gold February futures jumped by more than ₹2,400, or 1.8%, to hit a record high of ₹1,41,250 per 10 grams, while MCX silver March futures surged over 4% to scale its fresh peak of ₹2,63,996 per kg on Monday morning. International gold prices breached the $4,600-per-troy-ounce mark for the first time on Monday.

5. Caution due to the ongoing Q3 results season

Indian corporates have begun releasing their earnings for the December quarter. Investors' focus is on heavyweight sectors, such as banking and IT.

Several major IT and banking companies will report their Q3FY26 results this week.

TCS and HCL Tech will report their Q3 results on Monday, January 12, while Infosys' Q3 results are due on Wednesday, January 14. Reliance will report its results on Friday, January 16.

Banking majors HDFC Bank and ICICI Bank will report their Q3 results on Saturday, January 17.

Experts expect healthy earnings growth this quarter, but a disappointment will be a major headwind for the market, which is already under pressure.

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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.