Not a happy Monday for the stocks markets. The Nifty has slipped below the psychologically important 22,700 levels and the benchmark indices- Sensex and Nifty are both down nearly 1% each. The tech stocks see a big disappointment in trade today. The broader markets also see significant losses in trade with the BSE Midcap and Smallcap Indices down over a percent each.
Market veteran Deepak Jasani says, “Indian markets opened with a negative bias and the weak overnight cues from US have not helped. The market is anyway in the midst of a downward momentum and in this scenario, any negative news sees an amplified impact. The 22790 level on the Nifty is an important level to watch. If the market is not able to recoup that level intra-day, the downtrend could get accelerated. That apart the exact impact of the proposed reciprocal tariff on Indian exports by Trump continues to be another key worry for the markets.”
Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services added that “the sharp surge in Chinese stocks is another near-term headwind. The ‘Sell India, Buy China’ trade may continue for some time since Chinese stocks continue to be attractive. The sharp spike in CBOE VIX indicates that volatility will continue for some time. In the US, long-term inflation expectations are rising and, therefore, the expected rate cut by the Fed is unlikely to materialise. The Fed might even turn hawkish, impacting US stock markets. If this happens and the US bond yields start declining, FIIs may cease to be sellers in India and may even resume buying. The near-term scenario is highly uncertain.”
3 reasons why the stock market is falling today
The key reasons that are weighing on investor sentiment today include-
Weak cues from US
The US markets clocked one of their worst sessions on Friday January 21 on the back of worrying inflation data. The latest data seems to be pointing towards slowdown in US. This coupled with the uncertainty with regards to the exact ramification of the reciprocal tariff is leading to significant investor concern. The market is taking a cautious approach ahead of the announcements.
FII selling continues to be a big worry
The continuous FII outflow is another major factor that’s weighing on investor sentiment. FII levels have reached lowest levels since March 2024 and in 2025 alone, the outflows exceed Rs 1 lakh crore. If the spate of outflows since October is taken into consideration, the total FII selling exceed Rs 3 lakh crore. Additionally, in terms of the valuation plays, China continues to be a significantly more attractive market compared to India and analysts see the “Sell India, Buy China trade” play out for some more time. This may lead to more outflows.
Valuation worries
The other fundamental concern, that is also leading to significant FII outflow is the valuation of Indian stocks. The mid and the small caps especially, are still seeing significantly stretched valuations. Despite the recent spate of correction, most analysts see scope for further correction. A recent report by Kotak clearly warns of sharper correction in small and midcaps. As reported by Financial Express.com on February 18, the analysts at Kotak Institutional Equities believe that “Nonetheless, valuations are still fair-to-full-to-frothy for most parts of the market. The mid-cap., small-cap. and ‘narrative’ stocks will likely see further sharp correction.”