Foreign institutional investors (FIIs) continued to exit stocks on Monday with net sales of over Rs 5,000 crore, pushing the Nifty to close below 23,000 points for the first time in over seven months.
The rout was accentuated by China’s upgraded low-cost, low-power AI startup DeepSeek sparking worries about the profits of rivals, leading to a plunge in technology stocks worldwide. A closely watched gauge of chipmakers plunged almost 7%. Nvidia, the poster child of the AI boom, sank nearly 13%, erasing a record $465 billion from its market capitalisation.
The S&P 500 dropped 1.5% while the Nasdaq 100 was down about 2.5%. Dow went down around 0.28% after the markets opened. The pan-European STOXX 600 index fell 0.4%, while the blue-chip Euro STOXX 50 dropped nearly 1%.
Asia sent a mixed signal as Japan’s Nikkei dropped 0.9%, reversing an initial advance, while Singapore’s Straits Times index eased 0.1%. New Zealand’s equity benchmark slipped 0.6%. At the same time, Hong Kong’s Hang Seng rallied 1% and mainland blue chips added 0.1%.
In India, telecom, IT and technology were among the top sectoral losers, with all three falling over 3% each. The Nifty IT index fell by 3.36%, marking its biggest single-day decline since July 17, 2023.
The Sensex ended the day at 75,366.17, plunging 824.49 points or 1.08%. Similarly, the Nifty fell by 263.05 points or 1.14%, closing at 22,829.15, marking its first close below the 23,000-mark since June 6, 2024. Both indices are now trading approximately 13% lower than their respective peaks in late September.
“Nasdaq futures slumped and Japanese tech stocks declined, reflecting concerns over Chinese startup DeepSeek’s cost-efficient AI model, which is posing threats to the business models of US tech giants like Nvidia, OpenAI and Google. This also had a rub-off effect on Indian IT stocks,” said Siddhartha Khemka, head – research, Wealth Management, Motilal Oswal Financial Services.
Khemka added that going forward, investors will be closely watching upcoming Q3 results, US Federal Reserve’s stance and India’s Budget announcements during this 6-day trading week for further cues.
Foreign portfolio investors (FPIs) offloaded shares worth $581 million (Rs 5,015 crore) on Monday, taking their total selling in January so far to $7.7 billion (Rs 66,686 crore). In contrast, domestic institutional investors bought shares worth Rs 73,587 crore, including net buying of Rs 6,642 crore on Monday during the current month.
The selling was more pronounced in the broader market, with the BSE Midcap and BSE Smallcap indices plunging 2.68% and 3.51%, respectively. These indices have witnessed declines of up to 12.4% in January so far, underperforming the benchmark indices, which dropped up to 3.55% during the same period.
The market breadth was heavily negative on Monday, with six losers for every gainer (593 advances versus 3,522 declines). The NSE’s volatility index, India VIX, rose by 8.28%, closing at a five-month high of 18.13, signaling increased market volatility. Around 494 shares on the BSE and 452 stocks on the NSE touched 52-week lows, while 424 shares hit lower circuit filters on the NSE.
The broad-based selling resulted in a massive erosion of investor wealth, with market capitalisation dropping by Rs 9.2 lakh crore to Rs 410.3 lakh crore. So far in January, the BSE’s total market cap has declined by Rs 31.7 lakh crore, and by a staggering Rs 67.6 lakh crore since its peak in late September last year.
Among the top losers in the Sensex and Nifty pack were HCL Technologies, Tech Mahindra, Infosys and Wipro, with their stocks falling by up to 4.6%.