Sensex crashes nearly 13,000 points, Nifty 50 falls 16% from peak in 5 months: 5 key factors ailing Indian stock market

Indian stock market is going through a rough phase. Falling for the fifth consecutive month in February, the benchmark index Nifty 50 posted its longest monthly losing streak in 29 years (since 1996).

On Monday, March 3, the 30-share Sensex slipped 112 points to close at 73,085.94, while the Nifty 50 declined 5 points to end at 22,119.30.

Nifty 50 hit its all-time high of 26,277.35 on September 27 last year. Considering Monday's (March 3) close of 22,119.30, the index has plunged 4,158 points, or 15.82 per cent, from its peak. On the other hand, the Sensex has declined 12,892 points, or 15 per cent, from its peak of 85,978.25 to close at 73,085.94 on March 3.

The cumulative market capitalisation of the BSE-listed firms has dropped to nearly ₹384 lakh crore from ₹478 lakh crore on September 27, making investors poorer by about ₹94 lakh crore in a little over five months.

What's behind the fall in Indian stock market?

There are five crucial factors behind the Indian stock market's fall since October last year:

1. Trump, Fed and evolving global scenario

After September, stock market sentiment turned cautious ahead of the US presidential election in November.

Following the election, uncertainty over President Donald Trump's trade policies intensified, raising fresh concerns about a potential trade war.

Additionally, Trump's policies could fuel inflation in the US, potentially undermining the Federal Reserve's efforts to keep it in check.

Hopes of further rate cuts by the US Fed have waned. In fact, some experts say the era of ultra-low interest rate regimes is over, and there could be a prolonged period of elevated interest rates.

2. Domestic growth losing momentum

Signs of a slowdown in the domestic economy spooked foreign investors, who viewed India as the brightest spot amid a gloomy global growth outlook.

India's gross domestic product (GDP) declined for three consecutive quarters from Q4FY24 to Q2FY25. Even the Q3FY25 GDP growth at 6.2 per cent was the slowest since Q4FY23, barring the previous quarter (Q2), when it grew 5.6 per cent.

Some economists expect India’s FY25 GDP growth to be lower than the RBI and NSO (National Statistical Office) forecasts because of the comparatively slow economic growth in the first three quarters of the fiscal year.

Government capital expenditure remained low in the year's first half due to general and key state elections. An unpredictable monsoon further dampened growth, while weak rural and urban consumption worsened the macroeconomic outlook, adding to market jitters.

3. Weak earnings, recovery not in sight

India Inc. reported disappointing quarterly earnings for Q1, Q2, and Q3. With the Indian stock market at record highs, driven by strong support from domestic retail investors, valuations were stretched and in need of a trigger for consolidation.

Weak earnings provided that trigger. In October, foreign institutional investors (FIIs) began selling Indian equities due to a lack of valuation comfort. That started the correction in the Indian stock market, which continues.

The forward-looking stock market does not anticipate a rebound in corporate earnings in the next quarter (Q4), adding to the weak sentiment and delaying a recovery.

"The market expects weak Q4 results in FY25, as there is a buzz about Indian banks' declining credit growth. If true, it signals that Indian companies' capex is stagnating or going southward. As the Q3 results in 2025 were not so impressive, and the upcoming results are also expected to disappoint markets, bulls are hesitant to take on bears in a current stock market crash," said Sandeep Pandey, MD at Basav Capital Advisory.

4. Massive selloff by FIIs

Stretched valuations of Indian stocks, a slowdown in domestic economic growth, attractive valuations in other emerging markets such as China, elevated US dollar and bond yields, and fears of a trade war are the key reasons behind the exodus of FIIs from Indian markets. The steep selloff by FIIs has exerted pressure on the Indian stock market.

FIIs sold off Indian stock worth nearly ₹1.15 lakh crore in October in the cash segment. Nifty 50 crashed over 6 per cent that month. Since October, FIIs have sold off Indian stocks worth nearly ₹3.24 lakh crore.

5. Rupee's weakness

The Indian rupee has fallen to record low in recent times amid signs of macroeconomic weakness and dollar's rise against is peers. Rupee's weakness has aggravated the foreign capital outflow, further weighing on market sentiment.

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