India's benchmark indices fell nearly 1% extending decline for the third day amid negative global cues. Nifty fell below 25,000, while Sensex was down over 900 points. The broader segment of the market was also negative, with the Nifty Midcap 100 falling 1.96% and Smallcap 250 index slipped 1.95%.
Nifty fell below the 200-DMA on Wednesday and fell below the 25,000 mark for the first time since Oct. 6, 2025. The markets were in the oversold position as the weak breath in the market continues.
Volatility index VIX rose over 10% on Wednesday.
"We believe that, although the intraday market structure is weak, it is oversold; therefore, a sharp pullback rally from lower levels cannot be ruled out," Shrikant Chouhan, Head Equity Research, Kotak Securities.
The markets have fallen with sustained FII selling and uncertainty over the US Supreme Court's tariff ruling keeping sentiment fragile said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.
Here is why the markets are falling:
FPI Liquidations Continue
One of the key reasons impacting the market is the persistent selling from foreign portfolio investors (FPIs), who remained net sellers for 11 days straight on cash markets. This has created a significant dollar shortage.
Rupee At Record Lows
The pressure in rupee continued as the local currency opened at 91.08 against the US Dollar, before weakening further to 91.22 levels, thus reaching an all-time low. This is the fourth time the rupee breached the 91 per dollar mark, as poor momentum continues.
Global Tariffs Woes
Heightened geopolitical tension involving the US administration's "Greenland Tariff" threats has rattled markets. The potential for 10–25% levies on European allies has ignited fears of retaliatory trade wars, strengthening the US dollar globally.
Overhang Of The US-India Trade Deal Completion
Uncertainty regarding a long-awaited trade pact with Washington continues to weigh on investor sentiment, playing a key role in foreign investors avoiding the Indian market for now.
Union Budget Soon
With the Union Budget scheduled for February 1, the market is in a "wait-and-watch" mode. Investors are cautious about potential shifts in fiscal deficit targets and government borrowing plans for the next fiscal year.
Bonds Rise On Lower State Debt Supply
Indian bond yields have climbed, tracking the rise in US Treasury yields. This increase in domestic yields reflects a lack of demand and a "risk-off" sentiment, making the rupee less attractive to investors.
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