The Indian stock market has experienced a brutal sell-off today, during the last trading session of the month. The BSE Sensex collapsed by 961.42 points (1.2%) to end at 81,287.19 while the Nifty 50 plunged 317.90 points (1.25%) to 25,178.65. The carnage was widespread and the investor wealth wiped out some ₹5.5 lakh crore in a single day. The IT sector was somewhat resilient, but weighty sectors including banking, auto and FMCG sent the indices to their lowest levels in weeks.
4 Most Important Causes of the Crash in Market
1. Ongoing FII Sales & Worldwide 'Risk-Off' Mode
Foreign Institutional Investors (FIIs) have been conducting a long February selling frenzy. Selling pressure deepened Friday as global investors poured money into safe-haven havens like the US Dollar and Gold. The “risk-off” sentiment was stoked by a growing US Dollar Index, which traditionally makes developing countries such as India less attractive for foreign capital.
2. Geopolitical Uncertainty - The US-Iran Standoff
Market sentiment is still fragile owing to the tension between Washington and Tehran. Reports of nuclear talks had come out in Geneva, but without any concrete agreement and also the looming threat of US military operation, global energy markets and equity investors have remained cautious. Such uncertainty has prompted a cautious “wait-and-watch” mentality, leading to profit booking in domestic cyclicals.
3. The "AI Disruption" Scared IT
Though the IT index did end in the green on Friday, it remains after a catastrophic month over which it plummeted by nearly 20%—its biggest stretch since the 2008 financial crisis. Recent advances in AI (most notably Anthropic’s Claude Code) have raised structural fears that existing IT outsourcing models might be destroyed. Fear of this "AI-led disruption" has weighed heavily on long-term valuations of Indian technology giants like Infosys and TCS.
4. Trade War Anxiety and U.S. Trade Tariff Threats
Returning under Trump administration protectionist trade policies create a lot of volatility. Threats of 15 per cent global tariffs and the potential for section 232 (Trade Expansion Act) investigations have caused concern for export oriented sectors. Investors are especially concerned about countries that buy Russian crude oil like India perhaps subject to higher retaliatory tariffs from the US.
Investor Wealth Erosion
The market capitalization of every BSE listed firm has fallen to about ₹463 lakh crore, significantly below the previous session.
- Top Drags: HDFC Bank, ICICI Bank, Mahindra & Mahindra and Maruti Suzuki were also the worst performers, with auto stocks each down more than 2%.
- Sectoral Impact: Outside of the benchmarks sector, the weakness also appeared in the BSE MidCap and SmallCap benchmarks, which fell nearly 1% each on retail investors’ retrenchment plans.
