Why did Indian stock market fall today? EXPLAINED with five key reasons
The Sensex closed 1,282 points, or 1.55 per cent, down at 81,148.22, while the Nifty 50 settled at 24,578.35, down 346 points, or 1.39 per cent.
Indian stock market benchmarks, the Sensex and the Nifty 50, crashed more than 1 per cent each on Tuesday, May 13, amid mixed global cues. The Sensex crashed 1,386 points, or 1.7 per cent, to an intraday low of 81,043.69, while the Nifty 50 fell 377 points, or 1.5 per cent, to an intraday low of 24,547.50.
The Sensex finally closed 1,282 points, or 1.55 per cent, down at 81,148.22, while the Nifty 50 settled at 24,578.35, down 346 points, or 1.39 per cent.
The mid and small-cap segments, however, outperformed. The BSE Midcap and Smallcap indices ended 0.17 per cent and 0.99 per cent higher, respectively.
The overall market capitalisation of firms listed on the BSE dropped to nearly ₹431 lakh crore from ₹432.56 lakh crore in the previous session, making investors poorer by about ₹1.5 lakh crore in a single session.
Why did the Indian stock market fall today?
Experts believe the following five reasons could be behind the fall in the Indian stock market today:
1. Tariff woes are not behind
According to a PTI report, India has approached the World Trade Oraganisation (WTO) with a proposal to impose retaliatory duties against the United States over President Donald Trump's tariffs on steel and aluminium.
The report has indicated trade war worries are not behind, even though the ongoing negotiations between the US and India continue.
2. Profit booking after a 4% rally
Indian stock market benchmarks jumped nearly 4 per cent in the previous session after tensions between India and Pakistan eased. The sharp rally was largely driven by short covering, which in turn prompted profit booking by retail investors.
"It is important to understand that the sharp 916-point surge in Nifty was not caused by institutional activity. The combined FII and DII buying yesterday was only ₹2,694 crore. This means the market surge was triggered by short-covering and HNI plus retail buying. This implies that institutional activity is likely to remain subdued in the coming days, which may constrain the continuation of the rally," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
3. The US-China trade deal
Some experts believe the US-China trade deal could have a negative impact on the Indian stock market, as it may revive the 'sell India, buy China' narrative and lead to renewed foreign capital outflows from Indian equities.
“The domestic market may stay resilient in the very short term, but a major issue is the trade deal in the US and China. This could again trigger a sell India, buy China' trend,” said Vijayakumar.
4. The Indo-Pak factor continues weighing on
Some experts highlight the persisting element of fear in the market regarding the situation between India and Pakistan.
After Prime Minister Narendra Modi addressed the nation on Monday and warned Pakistan against misadventures, experts say there could be some retaliation from Pakistan's side also.
Meanwhile, shortly after Prime Minister Modi's address to the nation on Monday, 10 to 12 drones were intercepted in Samba, prompting a blackout in the region and Jammu for the fourth consecutive night.
5. The market lacks fresh catalysts
As uncertainty persists on the India-Pakistan front, the domestic market currently lacks fresh positive triggers to sustain its upward momentum.
With the country's healthy economic outlook and the anticipated earnings revival in Q1FY26 largely priced in, retail investors appear to be rotating funds from large-caps to mid- and small-cap stocks in search of higher returns.
However, experts highlight the risk lies in their tendency to overlook critical factors such as valuation comfort and management quality in the pursuit of potential multibaggers.
"Many retail investors who entered the markets after the COVID-19 crash still lack a clear understanding of reasonable market valuations, which may be influencing their short-term investment behaviour," said Vijayakumar.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.