In two consecutive sessions, the 30-share pack Sensex has crashed over 1,390 points, or 1.7%, while the Nifty 50 has dropped by 1.8%. Investors lost nearly ₹12 lakh crore in just two sessions.

The Indian stock market continued reeling under selling pressure for the second consecutive session on Tuesday, January 20, tracking weak global cues amid trade war risks and unimpressive Q3 earnings.

A day after falling by 0.40% each, the Sensex fell over 1,200 points, or 1.5% to an intraday low of 82,010.58 on Tuesday, while the Nifty 50 breached 25,200 on the downside, falling to 25,171.35 in intraday trade.

The Sensex finally closed 1,066 points, or 1.28%, down at 82,180.47, while the Nifty 50 closed at 25,232.50, with a loss of 353 points, or 1.38%.

The BSE Midcap index crashed 2.52%, while the Smallcap indices plunged 2.74%.

The India VIX volatility index jumped almost 8%, indicating that traders and investors expect the market to remain volatile in the near term.

Among the sectors, Nifty Realty crashed over 5%, while Consumer Durables plunged 3%. Auto, IT, Metal, and Pharma indices fell by 2% each. The Nifty Bank index declined by 0.81%, while the Financial Services index fell by 1.16%.

In two consecutive sessions, the 30-share pack Sensex has crashed over 1,390 points, or 1.7%, while the Nifty 50 has dropped by 1.8%. Investors lost nearly ₹12 lakh crore in just two sessions as the overall market capitalisation of BSE-listed firms dropped to nearly ₹456 lakh crore from nearly ₹468 lakh crore on Friday.

Why is the Indian stock market falling?

Let’s take a look at five key factors behind the downtrend in the Indian stock market:

1. Trade war fears

Investors appear increasingly concerned about the evolving geopolitical situation after US President Donald Trump signalled an aggressive stance on acquiring Greenland. He has threatened tariffs on eight European countries over their opposition to the move. In response, European leaders have reportedly begun exploring options to push back against what they describe as US coercion.

According to a Bloomberg report, “the European Union is considering potentially imposing tariffs on $108 billion of US goods if Trump follows through on his threat to hit European countries with a 10% levy on February 1.”

“The volatility in the market is likely to continue in the near-term till some clarity emerges regarding the US-Europe standoff on Greenland tariffs. Since both sides have hardened their positions, the uncertainty will continue for some time,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

2. Mixed Q3 earnings

Q3 earnings have been mixed so far, partly due to the one-time impact of the new labour codes. Experts note that while the numbers have largely remained stable, there has been a dearth of positive surprises, which has failed to lift market sentiment already weighed down by geopolitical concerns.

“Early Q3 results do not indicate a recovery in earnings growth. This is likely to change when the results of auto companies start flowing in, since this sector has done well in Q3, and it is heartening that the growth momentum is continuing in the sector,” said Vijayakumar.

3. Heavy FII selling

Foreign institutional investors (FIIs) have been selling Indian stocks relentlessly. In January so far, they have sold Indian stocks worth over ₹29,000 crore in the cash segment amid persistent uncertainty over an India-US trade deal, the rupee’s weakness against the dollar, and an earnings-valuation mismatch.

“We are seeing significant selling by foreign investors. Until a couple of days ago, foreign portfolio investors had sold around ₹22,000 crore this month, which is on the higher side and is weighing on the market,” said Pankaj Pandey, the head of research at ICICI Securities.

4. Money flowing to safe-haven assets

Increased geopolitical and geoeconomic risks have dimmed the prospects for riskier equities, driving investors toward safe-haven assets.

The record-breaking rally in gold and silver is prompting investors to book profits in stocks and invest in precious metals, which appear poised for further gains amid geopolitical uncertainties, the tariff war, and US Fed rate cut expectations.

5. Union Budget 2026 in focus

Experts say the market sentiment is also cautious ahead of the Budget on February 1, as expectations are high that the government will announce measures to accelerate economic growth, job creation, and consumer demand.

While the government is widely expected to maintain a balance between growth and fiscal consolidation, speculation that an overemphasis on fiscal consolidation may lead to curtailed government capital expenditure is keeping investors wary.