Mumbai. Stock Market Crash: 5 Key Factors
The Indian stock market experienced a significant downturn on Friday, with the Sensex plummeting 241.30 points to 77,378.91. The decline was attributed to a combination of global and domestic factors.
Global Cues
Unfavorable global cues, particularly strong US payroll data, led to a sell-off in global markets. This, in turn, impacted domestic markets, making emerging markets less attractive.
FII Sell-Off
Foreign Institutional Investors (FIIs) offloaded equities worth ₹2,254.68 crore, contributing to the market downturn. The rupee’s decline against the dollar, triggered by US sanctions on Russian oil exports, further exacerbated the situation.
Rupee’s Decline
The rupee logged its steepest single-day fall in nearly two years, ending 58 paise down at 86.62 against the US dollar. Analysts attributed this decline to the Reserve Bank of India’s (RBI) decision to allow the rupee’s exchange rate to weaken.
Rising Oil Prices
Brent crude prices surged above $80 a barrel, driven by US sanctions on Russian oil exports. This increase raised concerns about a potential spike in domestic inflation, which could delay rate cuts by the RBI.
Budget Expectations
The upcoming Union Budget 2025, scheduled to be presented on February 1, has also contributed to market uncertainty. Analysts expect a more subdued pre-budget rally this year, with the government likely to focus on providing relief to the middle class.
These factors combined to create a perfect storm that led to the stock market crash. As investors, it’s essential to stay informed and adapt to changing market conditions.
