A day after clocking a decent gain of half a per cent, the Indian stock market resumed its downward march. The benchmark, the Sensex, crashed over 1,100 points, and the Nifty 50 slipped below 24,500 during the session on Thursday, May 22.
The Sensex opened at 81,323.05 against its previous close of 81,596.63 and dropped 1,107 points, or 1.4 per cent, to an intraday low of 80,489.92. The Nifty 50 opened at 24,733.95 against its previous close of 24,813.45 and slipped 1.4 per cent to an intraday low level of 24,462.40.
Finally, the Sensex settled 645 points, or 0.79 per cent, down at 80,951.99, while the Nifty 50 closed 204 points, or 0.82 per cent, lower at 24,609.70. The mid and small-cap segments outperformed. The BSE Midcap index fell 0.33 per cent, while the BSE Smallcap index rose 0.17 per cent.
The overall market capitalisation of BSE-listed firms dropped to nearly ₹439 lakh crore from ₹441 lakh crore in the previous session, making investors poorer by about ₹2 lakh crore in a single session.
Why did the Indian stock market fall today?
Experts pointed out these five key reasons behind the fall in the Indian stock market today:
1. Concerns over piling US debt
US President Donald Trump’s tax and spending bill has raised fears that it will increase the US debt and further slow US economic growth.
“Trump’s tax bill is expected to be voted on this week in Congress, and investors are worried it could add about $3.8 trillion to the $36 trillion US debt pile,” reported Reuters.
According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, the fundamental issue is the US’s high fiscal deficit, which the market feels is unsustainable.
“The weak US 20-year bond auction and the spike in yields of 5-year, 10-year and 30-year bonds indicate the declining confidence in US bonds,” said Vijayakumar.
2. Escalating tensions in the Middle East
Reports of rising tensions between Iran and Israel also seem to have hit the risk appetite of investors.
CNN reported that the US has gathered new intelligence, suggesting that Israel is preparing for a potential military strike against Iranian nuclear facilities.
Meanwhile, Reuters reported that “Oman’s foreign minister said a fresh round of nuclear talks between Iran and the US would take place later this week.”
3. Lack of fresh positive triggers
Experts say the domestic market lacks fresh triggers to give a breakout. The domestic market has been rangebound as investors seek clarity on the US-India trade negotiations. The market seems to have fairly discounted economic growth in the short term and earnings revival from Q1FY26.
Experts say macroeconomic prints and earnings growth will be the key factors that will determine market direction going ahead.
Brokerage firm Kotak Securities pointed out that India’s good macro and mediocre micro could go either way.
“Many high-frequency indicators have seen steady weakness in recent months. Earnings outlook has deteriorated across market caps and sectors, as seen in the steady cuts in consensus earnings,” said Kotak.
4. Stretched valuations
The recent rally in Indian markets has stretched the valuations of large-caps, while mid- and small-caps are trading at lofty valuations. This has raised concerns that the market may see some deep correction in the near term.
“The market is again in the grips of irrational exuberance, with the market quick to discount any half-baked narrative (defence being the latest one). The market’s recurring tendency to buy into narratives is astonishing given the history of narratives. Many had emerged and collapsed in the past two to three years,’ said Kotak.
5. Mixed Q4 earnings fail to boost the market
Mixed Q4 earnings have failed to give a boost to market sentiment. Kotak Securities pointed out that Q4FY25 earnings season has been broadly muted, with Nifty-50 net profits growing 7.5 per cent year-on-year.
“Most large sectors saw a varying mix of growth and profitability challenges coupled with a dim outlook, with consumer companies reporting weak volume growth, margin headwinds and muted demand commentary, investment companies reporting margin challenges, banks reporting weak credit growth, and IT services companies indicating weak demand,” said Kotak.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
