The Indian stock market has corrected around 11 per cent till February 3 from its all-time high. While speaking with Outlook Money experts cited Donald Trump’s tariff announcement and FIIs selling as reason. Check the companies that took a hit in January
Indian stock market closed lower on February 3, with Nifty ending at 23,350. Meanwhile, Sensex witnessed a decline of 319.22 points or 0.41 per cent at 77,186 and the Nifty saw a decline of 121.10 points or 0.52 per cent at 23,361.05. This was also the second intraday trading session after the FY26 Budget session on February 1.
The Indian stock market closed on a flat note after witnessing a volatile session on February 1. The Sensex was up 5.39 points or 0.01 per cent at 77,505.96 and the Nifty was down 26.25 points or 0.11 per cent at 23,482.15.
As of now, Nifty has corrected around 11 per cent from its all-time high. Meanwhile, The Indian Rupee hit a record low of Rs 87.28 per US Dollar, ending at Rs 87.1850, down 0.7 per cent. This came after US President Donald Trump’s announcement on tariffs on Mexico, Canada, and China.
While speaking with Outlook Money experts cited Trump's action and reaction to the tariff war and continued selling pressure from FII along with modest domestic Q3 earnings, as the reason behind the fall.
During the period between January 1, 2025 and February 3, 2025, various Foreign Portfolio Investors (FPIs) exited from various Indian listed companies via bulk and block deals. Zomato witnessed a sale worth Rs 266.21 crore by UBS Principal Capital Asia. Coforge saw a selling of Rs 180.21 crore.
UBS Principal Capital Asia also offloaded equities in companies including, Fortis Healthcare for Rs 164.47 crore, One 97 Communications (Paytm) for Rs 159.25 crore, Max Financial Services for Rs 144.24 crore, Reliance Industries for Rs 138.48 crore, Blue Star for Rs 120.93 crore, Hyundai Motor India for Rs 103.80 crore, Glenmark Pharmaceuticals for Rs 101.38 crore, Infosys for Rs 90.75 crore, and Tata Consultancy Services for Rs 68.18 crore, as per Prime Database data.
Meanwhile, Dr Lal PathLabs saw an exit by Multi-Manager ICVC amounting to Rs 130.36 crore, and Home First Finance Co. (India) Ltd’s shares worth Rs 76.77 crore were offloaded by Govt. Pension Fund Global, during the same period. Additionally, Jupiter Wagons Ltd. saw a selloff worth Rs 146.24 crore by Atyant Capital India Fund-I.
Foreign institutional investors (FIIs) have sold nearly Rs 87,000 crore worth of Indian stocks in January 2025 and FY-25 Till Date FII Cash remained net sellers worth Rs -3,46,534 Cr while DII Cash remained net buyers Rs 5,02,705 crore. Multiple reasons have pushed FII to take this exit call. High valuations on broader markets, a depreciating rupee, and a slowdown in corporate sales growth which was visible in the last 2 quarters advocate the selling pressure, as per Prashanth Tapse, Sr VP Research Analyst at Mehta Equities Ltd.
FII are now focused more on the US due to the newly elected president's plan of Making America Great Again which is likely to benefit American businesses. Other Asian markets are also facing potential challenges, Tapse added.
Explaining the impact of FII selling, Bhavya Shah, Head of Research at Wallfort PMS said, FIIs have been net sellers for a very long time, however, the market sustained FII selling so far due to various factors.
The market movement will eventually toe business growth, and only the timing may change due to sentimental effect play. FIIs have been also buying where they see value and growth and their buy numbers will eventually outpace their sell numbers as India's long-term growth story is intact.
Why is the Indian stock market falling?
Markets are concerned over Trump's action and reaction to the tariff war and continued selling pressure from FII along with modest domestic Q3 earnings which is fueling markets to be under pressure. Globally Wall Street also dropped sharply lower last Friday’s trade after the White House confirmed it will impose tariffs on Mexico, Canada and China beginning February 1st along with other Asian markets, says Tapse.
Trump recently insisted on imposing 25 per cent tariffs on Canada and Mexico from February 1st and in response, Canada announced retaliatory tariffs, while Mexico indicated it would consider imposing its levies on US goods. China, in turn, stated its intention to file a lawsuit with the WTO.
We believe that this should be the primary reason for the market's decline, while a secondary factor is the shift towards investing in safe havens such as U.S. bonds. In the near to medium term, the market is likely to focus more on developments and news from the U.S., resulting in increased volatility within a broader trading range (Nifty 22600 and 23600). Furthermore, foreign institutional investors (FIIs) are consistently and gradually selling large-cap stocks, which is limiting the upside potential for the market, as per Shrikant Chouhan, Head Equity Research, Kotak Securities.
As trade barriers increase, countries that heavily rely on exports may face declining revenues, disrupted supply chains, and reduced competitiveness in international markets. This shift in trade balance could negatively affect exporting nations and businesses, potentially leading to lower economic output, job losses, and financial instability, explained Narendra Solanki, Head Fundamental Research- Investment Services, Anand Rathi Shares and Stock Brokers.
Speaking on the impact of Budget 2025 on the stock market, Sumit Chanda, CEO & Founder, of Jarvis Invest, opined that it will put more money in the pocket of the middle class which will eventually boost consumption. However, “lack of any significant rise in government capex was a dampener.”
Additionally, Mandar Bhojane, Equity Research Analyst, Choice Broking cited the weaker-than-expected Q3 earnings by large-cap companies, "leading to negative sentiment. High valuations in some sectors, particularly in midcaps and small caps, have led to profit booking."
Sharp selloff has led to corrections across the board. Valuations in certain pockets are turning reasonable and froth is out from many small & medium companies, as per Sunny Agrawal, DVP – Fundamental Research at SBI Securities.
The biggest beneficiaries will be the discretionary sector, especially consumer discretionary, auto, etc. Banks and NBFCs may also gain from an increase in business from farmers and MSMEs, opined Chanda.
Echoing Chanda’s opinion, Tapse said, “In the immediate reaction post-budget, a few sectors that are based on raising consumption along with spending demand would get re-rated like FMCG, FMEG, and NBFC.”
"The mid-term benefit of the budget will be seen in the BFSI sector with a rise in the FDI limit on the insurance sector to 100% from 74%. Also, the enhanced credit coverage to MSMEs, the National Manufacturing Mission, and the focus on the ‘Ease of Doing Business’ will push the manufacturing sector. The agriculture, FMCG, and energy sectors will also be seen to reap gains in the mid-term with the focused reforms in the budget," Ajay Garg, CEO, SMC Global Securities explained.