why does indian stock market is crashing?

The recent downturn in the Indian stock market can be attributed to several interrelated factors:

1. Global Trade Tensions and Tariff Policies: The announcement of new tariffs by former U.S. President Donald Trump has heightened global trade tensions. The U.S. imposed a 25% tariff on Canada and Mexico, and an additional 10% duty on China, raising the total tariff to 20%. These measures have raised concerns about a potential slowdown in global trade and economic growth, adversely affecting investor sentiment worldwide, including in India. Source: indiatoday.in

2. Continuous Foreign Institutional Investor (FII) Outflows: Foreign investors have been consistently withdrawing funds from the Indian equity markets. Since October, FIIs have sold over $26 billion worth of Indian stocks, with significant outflows observed in recent sessions. This persistent selling pressure has contributed to the market’s decline. Source: indiatoday.in

3. Weak Corporate Earnings Growth: The corporate earnings growth for Nifty 50 companies has been subdued, recording only a 5% increase in the October-December quarter. This marks the third consecutive quarter of single-digit growth, reflecting challenges in sustaining profitability amid a slowing economy. Source: indiatoday.in

4. Economic Slowdown: India’s economic growth is projected to slow to a four-year low of 6.4% in the current fiscal year. This deceleration has raised concerns about future corporate earnings and overall economic stability, leading to cautious investor behavior. Source : reuters.com

5. High Market Valuations: Despite the recent corrections, Indian stock valuations remain elevated. The Nifty 50’s forward 12-month price-to-earnings (PE) ratio stands at about 20, suggesting limited room for error and making the market susceptible to corrections. Source : reuters.com

6. Sector-Specific Pressures: Certain sectors, particularly Information Technology (IT), have experienced significant declines. The Nifty IT index fell by 1.92%, emerging as one of the biggest losers. Investors are concerned that higher tariffs and global trade tensions could reduce the outsourcing of tech services, affecting major Indian IT firms like TCS, Infosys, and Wipro. Source : indiatoday.in

In summary, a combination of global trade uncertainties, consistent foreign investor outflows, sluggish corporate earnings, economic slowdown, high valuations, and sector-specific challenges have collectively contributed to the recent decline in the Indian stock market.