Why Did Share Market Fall Today? Know Key Reasons For Stock Market Crash On February 3 – News18
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Share market today live: Trump tariffs, rupee fall among key factors behind today’s stock market crash.
Stock Market Crash
Share Market Today Live: Indian benchmark equity indices, Sensex and Nifty, opened sharply lower on Monday, following negative cues from Asian markets, after US President Donald Trump’s tariffs on Canada, Mexico, and China raised fears of a broader trade war.
At 9:17 am, at intraday-low, the BSE Sensex had dropped 695 points, or 0.91%, to 76,812, while the Nifty50 fell by 211 points, or 0.90%, to 23,271.
Meanwhile, the market capitalisation of all listed companies on the BSE shrank by Rs 4.63 lakh crore, reaching Rs 419.21 lakh crore.
Key Factors Behind The Monday Stock Market Crash
Trump Tariffs Spark Trade War Fears
The market downturn follows Trump’s decision to impose tariffs on Canada, Mexico, and China over the weekend, intensifying concerns about the potential impact on global economic growth. Trump imposed a 25% duty on Canada and Mexico and a 10% levy on China, citing the need to address issues like migration and the flow of fentanyl into the U.S.
In response, Canada and Mexico pledged to retaliate, while China announced plans to challenge the tariffs at the World Trade Organization. These tariffs, outlined in three executive orders, are set to take effect on Tuesday.
US Treasury Yields Rise
US two-year Treasury yields increased by 3.6 basis points to 4.274%, marking a one-week high amid worries that the tariffs could trigger US inflation and delay interest rate cuts. Rising US Treasury yields typically attract capital flows away from emerging markets like India, which could lead to a weaker currency and higher borrowing costs.
Indian Rupee Weakens
The US dollar reached record highs against the Chinese yuan, its strongest level against the Canadian dollar since 2003, and its highest point against the Mexican peso since 2022. The Indian rupee also weakened past Rs 87 per US dollar for the first time on Monday, driven by Trump’s tariff actions, which fueled a surge in the US dollar.
“For now, India is not directly affected, so the impact on the Indian market will be less. However, the spike in the dollar index above 109.6 will likely trigger more selling by FIIs, putting additional pressure on the market,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Weak Global Sentiment
The Indian stock market reacted to negative global cues, with major Asian markets falling sharply on Monday. Japan’s Nikkei and South Korea’s KOSPI both dropped by 3% after Trump’s tariff announcements raised concerns about a potential global trade war that could slow down economic growth.
“Despite a strong budget, the market will remain under pressure from Trump’s tariffs and the increased global uncertainty these initial tariffs have triggered,” said Vijayakumar.
Caution Ahead of RBI MPC Meeting
With the Union Budget concluded, attention is now focused on the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting. Experts are anticipating a 25 basis point rate cut to further support consumption and boost economic growth after Finance Minister Nirmala Sitharaman’s income tax reforms aimed at stimulating demand.
Ongoing Foreign Capital Outflows
Relentless selling by foreign institutional investors (FIIs) has been a key driver of the market downturn since October 2024. FIIs have consistently offloaded Indian equities, contributing to weak investor sentiment and monthly declines in the Nifty 50. From October 1, 2024, to February 1, 2025, FIIs have sold Indian stocks worth nearly ₹2.7 lakh crore, exacerbating the market’s downward trend.
Rising US dollar strength, higher bond yields, weak quarterly earnings, and stretched stock valuations have been key factors driving foreign investors away from the Indian market since October.
