On Tuesday, there was a ruckus in the stock market. Sensex and Nifty closed with a decline of more than 1 percent. Where Bombay Stock Exchange’s main index Sensex fell by 1,069 points or 1.28 percent and closed at 82,225.92. On the other hand, the main index of National Stock Exchange Nifty fell by 1.12 percent and closed at 25,424.65. Mid- and small-cap indices also closed in negative territory, but still outperformed the benchmarks.
The BSE 150 Midcap index slipped 0.40 per cent, while the BSE 250 Smallcap index fell 0.76 per cent. If we talk about the loss of investors, then Rs 3 lakh crore was seen. According to the data, the total market capitalization of BSE-listed firms declined to Rs 466 lakh crore from Rs 469 lakh crore in the previous session, causing a loss of Rs 3 lakh crore to investors. Let us also tell you that who are those 5 villains of the stock market, who made investors lose Rs 3 lakh crore?
Five villains of stock market decline
Fear of US tariffs
The US Supreme Court (SCOTUS) struck down Trump’s tariffs last week, but it seems that this has made the Trump Administration more aggressive with its tariff strategy. According to a Bloomberg report, the Trump Administration is planning to use Section 232 of the Trade Expansion Act of 1962 to replace the global tariffs struck down by the Supreme Court.
Trump has threatened other countries that if they support the US Supreme Court’s decision, they may have to face higher tariffs on goods imported into the US. Meanwhile, all eyes are on the first official State of the Union address of US President Donald Trump on February 24 for his second term.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said that today’s State of the Union speech of President Trump and the message he will give will be kept an eye on by markets across the world. In view of the changes in tariffs after the US Supreme Court decision, the EU stopping the deal with the US and Trump’s warning to the countries withdrawing from the deal shows that the tariff drama will have an even worse impact on the economy and markets.
US-Iran tension
Investors are cautious due to the changing situation in Iran, as protests have spread across Iran and thousands of people have reportedly been killed in the government’s violent response. The United States has threatened Iran with military action. The next round of nuclear talks between Washington and Tehran is to be held on Thursday, February 26.
Selling in IT stocks
Heavy selling in IT stocks is affecting the entire market sentiment. The Nifty IT index fell nearly 5 per cent on Tuesday amid concerns over problems caused by AI and increased interest rates in the US and has fallen nearly 21 per cent so far in February. Selling in IT stocks is being seen across the world.
For example, IBM’s stock price fell to its lowest level in nearly three decades on Monday after Anthropic said its cloud code tool could help modernize COBOL, an older programming language that runs on IBM computers.
Anthropic said cloud code can now be used to automate the exploration and analysis that underpins COBOL modernization challenges. Notably, Cloud Code is the same AI tool that triggered a massive selloff in IT stocks in the last few weeks.
Increase in crude oil prices
Ahead of the third round of nuclear talks between the US and Iran, Brent crude prices rose 1 percent on Tuesday and crossed the level of $ 72 per barrel, which is close to a six-month high. The increased prices of crude oil are affecting the market sentiment. India is the world’s third largest importer of crude oil. Higher prices can put pressure on the country’s macroeconomic stability, increase inflation and weaken the currency.
strong dollar
The dollar index rose 0.20 percent and looks set to come back to the level of 98. A strong dollar is generally negative for emerging markets like India, because it increases the risk of foreign capital going out. After the announcement of India-US trade deal, this month Foreign Institutional Investors (FIIs) have started buying Indian equities in the cash segment. However, valuations are still high, and a good recovery in earnings is yet to happen. A sustained rise in the dollar could derail the recent FII inflows into Indian equities.