Sensex Plummets by 931 Points | Nifty Drops Below 24,500 | 4 Key Factors Behind the Decline in Indian Stock Market

Indian share markets opened on a positive note but failed to maintain momentum, closing weak as the day progressed. Benchmark indices BSE Sensex and Nifty 50 traded deep in the red by the end of Tuesday’s session, affected by a confluence of factors that led to a broad-based market downturn.

At the closing bell, BSE Sensex recorded a steep fall of 931 points, marking a 1.2% decline, while NSE Nifty fell 309 points, down by 1.3%. This decline left investors concerned as markets continued to struggle under various pressures. Several sectoral and macroeconomic factors played a key role in the day’s sharp downturn, with certain sectors and stocks being hit harder than others.

Key Performers and Laggards of the Day

Among the top gainers of the day was ICICI Bank, which managed to hold ground amid the broader market weakness. However, the market saw a more prominent list of laggards, with Adani Enterprises, M&M, and Coal India among the top losers. Their declines added to the market’s overall weakness, dragging the indices lower as the session came to a close.

GIFT Nifty, a key barometer for Indian stock performance on international exchanges, closed lower by 253 points, settling at 24,526, further highlighting the broad-based selling pressure.

Sectoral and Broader Market Performance

Broader markets experienced an even sharper downturn. BSE MidCap index ended 2.5% lower, and BSE SmallCap index plummeted 3.8%, reflecting widespread weakness across mid-sized and smaller companies. This sector has remained under pressure for some time, exacerbated by persistent selling from foreign institutional investors (FIIs) and subdued domestic earnings.

Sectoral indices across the board were trading on a negative note, with stocks in the metal, realty, and power sectors facing the most intense selling pressure. Additionally, PSU Bank and Realty indices were the worst hit, both falling more than 3% by the end of the session.

Despite the grim picture, there were some outliers. Shares of Torrent Power and Indigo Paints hit their respective 52-week highs, offering a glimmer of hope amid the market’s otherwise gloomy performance.

Key Reasons Behind the Market Decline

Several factors contributed to the market’s fall. Below are the primary reasons for the downturn:

1. Small-cap Stocks Dragging the Market Down

One of the most significant contributors to the market’s decline has been the continued weakness in small-cap stocks. BSE SmallCap index fell 2% in intra-day trading, weighed down by relentless selling from FIIs and lackluster domestic earnings. BSE SmallCap index closed at 54,387, marking a 2.3% decline for the day, making it the biggest loser among the broader market indices.

2. Rising Geopolitical Tensions in the Middle East

Geopolitical tensions, particularly in the Middle East, have kept global investors on edge. According to reports, Hezbollah launched rockets at multiple targets in Israel, raising concerns about escalating conflict. These tensions have raised fears of a broader impact on global markets, leading to a risk-averse stance among investors.

3. Weakness in Index Heavyweights

Major companies in the Nifty 50 and Sensex, including Mahindra & Mahindra, Tata Motors, Tata Steel, and IndusInd Bank, were some of the top drags, contributing significantly to the market’s decline. With 41 out of 50 Nifty 50 stocks trading in the red, the impact of this selloff was deeply felt across the board.

4. Sectoral Pressure

Sector-specific indices faced significant downward pressure, with the PSU Bank index falling 3.59% and Realty index dropping 3.39%. Other sectors such as Metal, Auto, Consumer Durables, and Oil & Gas also saw declines ranging from 2% to 3%, further contributing to the market-wide selloff.

Specific Industry Insights: Shipbuilding Stocks Hit Hard

Shares of major shipbuilding companies were under pressure, with stocks like Mazagon Dock Shipbuilders (MDL) falling by 10%, and Garden Reach Shipbuilders & Engineers (GRSE) and Cochin Shipyard (CSL) also suffering significant losses. This sector faced growth concerns as trade protectionism and geopolitical risks loomed large.

In addition, Cochin Shipyard was particularly hard-hit after the government sold a 5% stake via an offer for sale (OFS). Despite these headwinds, analysts maintain a positive long-term outlook on the shipbuilding industry due to robust order books and the need for new tonnage to meet regulatory demands.

Supreme Industries Faces a 10% Drop

In a separate sector, Supreme Industries shares fell 10% after the company reported muted earnings for Q2FY25. The company’s revenue declined by 1.6% year-on-year, while its profit after tax (PAT) dropped 15%, reflecting broader challenges in the industry. Despite the drop, the company remains debt-free and has announced an interim dividend, providing some relief to its shareholders.

In Summary, The Indian share market’s sharp decline on Tuesday reflects a combination of domestic and global factors. With small-cap stocks under heavy pressure, escalating geopolitical tensions in the Middle East, and sectoral weaknesses, the market experienced broad-based selling. Investors should keep a close eye on developments in both domestic and international markets, as these factors will likely continue influencing sentiment in the near term.

While markets may remain volatile in the coming weeks, opportunities for long-term investors still exist in sectors such as shipbuilding and financial services, where growth potential remains strong despite the immediate challenges.