Mumbai: A day after ending with decent gains of about half a per cent, Indian stock market benchmarks resumed their downward march on Friday, January 23, on profit booking amid persisting geopolitical uncertainties, caution ahead of the Union Budget 2026, and mixed Q3 earnings.
The Sensex crashed 770 points, or 0.94%, to close at 81,537.70, while the Nifty 50 dropped 241 points, or 0.95%, to settle at 25,048.65.
The sell-off was broad-based and even more intense in the mid and small-cap segments, as the BSE Midcap and Smallcap indices dropped by 1.6% and 2.2%, respectively.
Investors lost over ₹6 lakh crore in a single session as the overall market capitalisation of BSE-listed firms dropped to below ₹452 lakh crore from ₹458.5 lakh crore in the previous session.
WHY DID THE INDIAN STOCK MARKET FALL?
Experts highlighted the following five factors behind the fall in the Indian stock market:
1. Persisting geopolitical uncertainties
Even as there are clear signs of tensions between the US and Europe over Greenland defusing, market participants are cautious due to the lack of clarity over the so-called “deal” between the US and NATO.
According to news agency Reuters, the US President claimed on Thursday to have secured permanent, total U.S. access to Greenland in a deal with NATO.
On the other hand, details of any agreement were unclear. The Reuters report further added that “Greenland’s Prime Minister Jens-Frederik Nielsen said he was still in the dark on many aspects.”
The ongoing ambiguity around the US–NATO Greenland deal is keeping market sentiment fragile.
2. Rupee near 92 per dollar
As PTI reported, the Indian rupee hit a record low of 91.99 against the US dollar in intraday trade on Friday, dealing a strong blow to market sentiment.
Currency weakness has been a key factor behind the sombre mood in the domestic market lately. After a 5% decline last year, the Indian rupee is down more than 2% so far this year.
3. Massive FII selling
FIIs’ relentless selling of Indian equities is keeping the market down. FIIs have sold off Indian stocks worth over ₹36,500 crore in the cash segment in January so far.
“Since earnings growth is some time away and the FII selling strategy is expected to continue, preempting any healthy rally, the market is heavily net short. FIIs are adding to the short positions on every rally triggered by some positive news,” VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
4. Caution ahead of the Budget
There is also some caution ahead of the Union Budget 2026, as investors expect pro-growth and investor-friendly measures such as higher capital expenditure on infrastructure, job creation initiatives, and rationalisation of LTCG tax to accelerate economic growth and facilitate investment.
But, there are speculations that the government may not announce measures to boost consumption, and there is limited scope for capex increase, also due to a high base. A focus on fiscal consolidation may also mean the government’s expenditure may remain tight.
“We expect a modest increase in capital expenditure, given the base is already high (at ₹11.2 lakh crore) and capex has grown at a 20%+ CAGR over FY21-FY25. With limited fiscal room, we don’t expect any new measures to accelerate consumption,” said Pankaj Pandey, the head of research at ICICI Securities.
5. Mixed Q3 earnings
While Q3 results have not shown any major negative surprises, except for the one-time impact of new labour codes, there has been no material growth either, which has failed to lift market sentiment amid global chaos.
Also Read: Gold Nears 1.5 Lakh Mark And Silver Sets Record High Amid US-Europe Trade War
A Mint analysis of early Q3FY26 results showed Indian corporates clocked the weakest profit growth in at least three years, despite the best top-line expansion in the quarter in over a year.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mubmai Samachar. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.