The Indian stock market experienced a major fall in 2025 due to a combination of global and domestic factors, including aggressive foreign investor outflows, US trade tensions and tariffs, domestic policy uncertainties, high inflation, and weak corporate earnings.
Key Reasons for Market Fall
- Global Economic Concerns
US tariffs on Indian exports under President Trump triggered major selloffs and investor panic, significantly shrinking market valuations. - A stronger US dollar and rising US interest rates made American assets more attractive, leading foreign portfolio investors (FPIs) to withdraw large amounts of capital from Indian equities.
Foreign Investor Exits - FPIs withdrew over ₹61,000 crore (roughly $7.3 billion) from the Indian market between January and March 2025.
- Sustained selling pressure from FIIs (foreign institutional investors) caused underperformance, especially among large-cap stocks.
Domestic Weaknesses - Inflation and unemployment rose domestically, worsening investor sentiment and consumer confidence.
- Corporate earnings disappointed, and industry sectors like IT and financial services suffered deep declines.
- Uncertainty around policy decisions and coalition government gridlock added further instability.
Government & Regulatory Measures - The RBI engaged in rupee stabilization and open market operations, and SEBI imposed restrictions to reduce market volatility.
- Discussions for fiscal stimulus and reforms occurred, such as GST changes, but recovery remained uneven and slow.
Sector Impact - Sectors hit hardest included IT, Banking, Financial Services, and Metals, while occasional rebounds were observed in select infrastructure and banking stocks due to attractive valuations and some domestic buying.
Recent Trends After hitting multi-month lows, the market saw brief rebounds driven by buying in IT stocks and hopes of improved US-India trade relations; however, volatility is expected to persist.
In summary, the fall was led by aggressive FII selling, weak earnings, US-led trade tension, domestic inflation, and policy disruptions, with both global and local factors deeply affecting Indian equities.
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