Why Did India's Stock Market Plunge Over 1%? Key Factors Explained!

On Tuesday, India's stock market faced a significant downturn, with the Sensex and Nifty dropping over 1%. This decline was driven by heavy selling from major companies amid rising geopolitical tensions and a weakening rupee. Foreign institutional investors sold off equities, while domestic investors remained active buyers. The market's negative sentiment reflects broader global trends, including concerns over US tariffs and their impact on international markets. Explore the details of this market shift and its implications for investors.

By Narendra Chaudhary Jan 20, 2026, 16:25 IST

Market Overview

Mumbai: On Tuesday, the benchmark stock indices, Sensex and Nifty, experienced a significant drop of over 1% due to substantial selling pressure from major players like Reliance, Bajaj Finance, and Mahindra & Mahindra, amid rising geopolitical tensions.

Additionally, the ongoing depreciation of the rupee and continuous outflows of foreign funds negatively impacted investor sentiment.

Continuing its downward trend from the previous day, the 30-share BSE Sensex fell by 1,065.71 points, or 1.28%, closing at 82,180.47. At one point during the day, it had plummeted by 1,235.6 points, or 1.48%, reaching 82,010.58.

The 50-share NSE Nifty also saw a decline, dropping 353 points, or 1.38%, to finish at 25,232.50.

Among the 30 companies listed on the Sensex, Eternal saw the largest decline at 4.02%, followed closely by Bajaj Finance at 3.88%. Other notable losers included Sun Pharma, InterGlobe Aviation, Trent, Asian Paints, Mahindra & Mahindra, and Bajaj Finserv.

HDFC Bank was the sole gainer in this group.

Foreign institutional investors sold equities worth ₹3,262.82 crore on Monday, while Domestic Institutional Investors (DIIs) were net buyers, acquiring stocks valued at ₹4,234.30 crore, as per exchange data.

In the Asian markets, indices such as South Korea's Kospi, Japan's Nikkei 225, Shanghai's SSE Composite, and Hong Kong's Hang Seng all closed lower.

European markets were also trading down by over 1%.

US markets were closed on Monday due to a holiday.

"The unpredictable and aggressive use of tariffs by the US government as a tool of foreign policy is causing significant anxiety among global market participants, leading to sharp fluctuations in financial markets. This situation has adversely affected risk assets while boosting the prices of safe-haven commodities like gold and silver," stated Ponmudi R, CEO of Enrich Money, a trading and wealth technology firm.

"Recent threats from US President Donald Trump to impose further tariffs on European countries opposing the US's move to control Greenland have sparked another wave of global equity selling, impacting Indian markets as well," he added.

The Indian equity market concluded the trading session on a notably negative note, reflecting a mix of weak global signals, cautious investor behavior, and a lack of risk appetite.

Brent crude, the global oil benchmark, saw a slight increase of 0.09% to reach USD 63.91 per barrel.

On Monday, the Sensex had already declined by 324.17 points or 0.39%, closing at 83,246.18, while the Nifty fell by 108.85 points or 0.42% to 25,585.50.