Indian Stock Markets Plunge as FIIs Continue Heavy Selling Amid Global Uncertainty

The Indian stock markets witnessed another sharp decline on Monday, reflecting growing investor concerns over earnings growth, valuations, and global trade policies. The BSE Sensex plunged 644 points intraday, reaching a low of 75,295, while the NSE Nifty50 tumbled 204 points to touch 22,725. The persistent selling pressure weighed heavily on the broader market sentiment, leading to substantial losses across various indices.

The market downturn was led by significant declines in large-cap stocks, with companies such as M&M, ICICI Bank, Bharat Electronics, Axis Bank, Wipro, Bharti Airtel, HDFC Life, Hero MotoCorp, Infosys, Tata Steel, and L&T among the worst performers. These heavyweights, which have considerable influence over benchmark indices, struggled under the pressure of sustained foreign outflows and concerns surrounding economic growth.

The impact of the market crash was not limited to blue-chip stocks. Broader indices also experienced substantial declines, with the Nifty SmallCap index losing 363 points (2.3%), while the Nifty MidCap index saw an even steeper fall of 1,151 points (2.3%). Among the worst-hit mid-cap and small-cap stocks were Aegis Logistics, Triveni Turbine, Tanla Platforms, Signature Global, Radico Khaitan, Titagarh Rail Systems, Garden Reach Shipbuilders, RVNL, Supreme Industries, Policybazaar, Mazagondock Shipbuilders, Bharat Dynamics, Hindustan Zinc, and Godrej Properties. The sharp correction in these segments highlighted broader investor anxiety, with traders and fund managers shifting to a cautious stance.

According to market analysts, the primary reason behind the persistent selling pressure is the continued exit of foreign institutional investors (FIIs) from Indian equities. Since October 2024, FIIs have offloaded Indian stocks worth a staggering Rs 2.94 trillion, with Rs 1.16 trillion being sold in just the first two months of 2025. The aggressive pullback by overseas investors has intensified concerns over liquidity in domestic markets, prompting further volatility.

Analysts believe that a combination of factors is driving this negative sentiment. Key concerns include uncertainty over corporate earnings growth, especially in sectors where valuations remain high despite slowing revenue expansion. Additionally, nervousness over trade policies introduced by US President Donald Trump has further exacerbated selling pressure. Recent indications of reciprocal tariffs on Indian exports have rattled market participants, raising fears of potential disruptions in key industries.

Another crucial factor influencing investor sentiment is the possibility of a more hawkish stance by global central banks, particularly the US Federal Reserve. Economic policies under the Trump administration are expected to contribute to higher inflation, which could prompt the Fed and other central banks to tighten monetary policies. This shift would make emerging market assets, including Indian equities, less attractive to foreign investors, further driving outflows.

With sustained foreign selling, investors are now looking toward domestic institutional investors (DIIs) to provide some stability to the markets. However, with uncertainties surrounding global trade policies, inflationary risks, and earnings outlook, short-term volatility is expected to persist. Experts suggest that market participants should adopt a cautious approach, focusing on fundamentally strong stocks with robust earnings potential.

As the Indian stock markets continue to reel under heavy selling pressure, all eyes will be on upcoming economic data, corporate earnings reports, and global policy developments to gauge the direction of market movements in the coming weeks.

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