Stock market crash: Sensex ends 2,227 points lower; 5 key factors behind bloodbath in Indian share market

Stock market crash today: The Indian stock market suffered massive losses on Monday, April 7, mirroring the trends seen in major global markets amid mounting fears over the impact of a global trade war triggered by US President Donald Trump's reciprocal tariffs.

The Sensex crashed nearly 4,000 points, while the Nifty 50 dropped below 21,750 in early deals.

Finally, the Sensex ended 2,227 points, or 2.95 per cent, lower at 73,137.90, while the Nifty 50 settled 743 points, or 3.24 per cent, down at 22,161.60.

The BSE Midcap and Smallcap indices closed with losses of 3.46 per cent and 4.13 per cent, respectively.

The volatility index India VIX surged 66 per cent to 22.8, indicating extremely high nervousness in the market.

Among the sectoral indices, Nifty Bank lost 3.19 per cent, while the Financial Services index declined 3.49 per cent.

Metal (down 6.75 per cent), Realty (down 5.69 per cent), Media (down 3.94 per cent), Auto (down 3.78 per cent), Private Bank (down 3.47 per cent), PSU Bank (down 2.84 per cent), Pharma (down 2.75 per cent) and IT (down 2.51 per cent) ended with massive losses.

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Investors lost nearly ₹14 lakh crore within minutes as the overall market capitalisation of the BSE-listed firms dropped to ₹389 lakh crore from over ₹403 lakh crore in the previous session.

As many as 775 stocks hit their 52-week lows in intraday trade on the BSE.

Why did the share market fall today?

Here are the five key factors that appear to be behind the bloodbath in the Indian stock market:

1. Global selloff

Almost every major market across the world is down with deep cuts as Trump administration showed no sign of backing away from their tariff plans.

According to a Reuters report, Trump on Sunday termed tariffs as "medicine" and said foreign governments would have to pay significantly to lift tariffs.

He said he was not concerned about losses in global stock markets.

"I don't want anything to go down. But sometimes you have to take medicine to fix something," Reuters quoted Trump saying so.

There is bloodbath across markets in Asia, Europe and the US. In Asia, Taiwan Weighted crashed 10 per cent during trade on Monday, while Nikkei cracked 7 per cent.

On Friday, the S&P 500 crashed 5.97 per cent and Dow Jones ended with a loss of 5.50 per cent. Tech-heavy Nasdaq plunged 5.73 per cent.

Weakness in the global stock market weighs heavily on domestic stock market sentiment.

2. Tariff impact still not priced in

The Trump administration has adopted a rigid stance on the sweeping tariffs imposed on more than 180 countries. This has added to market nervousness, dashing hopes of a favourable outcome from swift negotiations.

In the context of Indian markets, experts believe there could be further downside in the first quarter of the current financial year.

"We see further downside for Indian equities in Q1YF26, notwithstanding the complacent response to the reciprocal tariffs by the US," said brokerage firm Emkay Global.

"The direct impact on India may be muted, but the resulting US recession poses a nearly 3 per cent risk to FY26 Nifty EPS (earnings per share), and the consequent derating could push the Nifty down to 21,500," Emkay said.

3. Fears of growth slowdown

Experts believe Trump's tariffs will drive up inflation, shrink corporate profitability, hit consumer sentiment and weigh on economic growth.

After Trump imposed reciprocal tariffs on April 2 and China retaliated with additional tariffs of 34 per cent on US goods, concerns have risen significantly that major trade war would deal a severe blow to global economy.

According to Reuters, JP Morgan has raised its odds for a US and global recession to 60 per cent, up from 40 per cent previously.

"The size and disruptive impact of US trade policies, if sustained, would be sufficient to tip a still healthy US and global expansion into recession," Reuters quoted Bruce Kasman, head of economics at JPMorgan, saying so.

While India is expected to be relatively less affected by Trump’s tariffs, it cannot remain insulated from the broader global economic slowdown.

According to Reuters, after Trump imposed a 26 per cent tariff on India, Goldman Sachs trimmed its growth estimate for the country to 6.1 per cent from 6.3 per cent. Citi expects a 40 bps drag on the Indian economy's growth, while QuantEco Research estimated a 30 bps impact.

4. FPI outflow resumes

After turning buyers in the cash segment last month, foreign portfolio investors (FPIs) resumed selling Indian equities again in April. Till Friday, FPIs have sold off Indian equities worth ₹13,730 crore in the cash segment this month amid mounting uncertainty over the impact of the Trump tariff on the global economy.

There are concerns that the foreign capital outflow could deepen if India fails to strike a favourable deal with the Trump administration.

5. RBI MPC, Q4 earnings in focus

To some extent, there is caution ahead of the policy decision of the Reserve Bank of India (RBI) on April 9. In the evolving situation, expectations are rising that the central bank will cut rates and take additional steps to support growth.

Q4 earnings are starting this week. TCS will report its March quarter numbers on April 10. More than the numbers, the focus will be on management commentary in the wake of a trade war.

(With inputs from Reuters)

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