Stock Market Crash: Top reasons why Sensex tanked 1,400 pts, Nifty 400 pts

Indian stock market crash: The Indian benchmark indices, Nifty50 and Sensex, faced a sharp decline on the last trading day of the week, Friday, February 28, 2025, weighed down by the impact of Trump’s tariffs, continued Foreign Institutional Investor (FII) selling, and weak global cues.

 

The Sensex plunged 1.97 per cent, or 1,471 points, to an intraday low of 73,141. Meanwhile, the Nifty50 slipped 1.95 per cent, or 440 points, to an intraday low of 22,105. The Sensex eventually ended with a loss of 1,414 points at 73,198, and the Nifty 420 points lower at 22,2125 on Friday.

 

Among the top losers on the NSE and BSE were IndusInd Bank (down 6.18 per cent), Tech Mahindra (5.83 per cent), M&M (4.27 per cent), and HCLTech (3.69 per cent). 

 

 

Notably, stocks like Infosys, M&M, Bharti Airtel, TCS, and HCLTech were the top contributors to the downward pressure on the indices.

 

V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, "Stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected US president. The spate of tariff announcements by Trump has been impacting markets, and the latest announcement of an additional 10 per cent tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favorable to the US."

 

Vijayakumar further added, "How China responds to the latest round of tariffs remains to be seen. Even now, the markets have not discounted a full-blown trade war between the US and China. It is likely to be avoided. However, the uncertainty element has increased, as reflected in the sharp spike in the CBOE volatility index to 21.13."

 

Ajit Mishra of Religare Broking pointed out, "The past two sessions reflect indecision, likely due to oversold conditions. However, rotational selling across key sectors is not only limiting the rebound but also gradually dragging the index lower."

 

Despite the current market weakness, Vijayakumar remains optimistic for March, suggesting, "March is likely to witness a recovery in the Indian market, backed by better macro news flows and subdued FII selling. Since large-cap valuations are fair, and in pockets attractive, FIIs are unlikely to press selling as aggressively during the last few months. Long-term investors can utilize the weakness in the market to slowly accumulate fairly-valued quality large caps and select fairly-valued stocks in the broader market, like defense stocks, for instance."

 

Meanwhile, here are the top factors behind the stock market fall on Friday:

 

Trump Tariffs

 

US President Donald Trump, on Thursday, announced that his proposed tariffs on Mexico and Canada will take effect on March 4. Additionally, China will face an extra 10 per cent tariff starting on the same date.

 

The 25 per cent tariffs on imports from Mexico and Canada had been delayed for a month, with the pause expiring on February 3. However, there had been uncertainty about whether these tariffs would be reinstated. 

 

According to reports, Trump confirmed that they would go into effect as planned. Trump stated, without providing evidence, that illegal drugs "are still pouring into our Country from Mexico and Canada at very high and unacceptable levels," despite promises from both countries to increase border security efforts. He stressed that until this issue is majorly addressed, the proposed tariffs would be enforced.

 

Trump also confirmed that China, which already faces a 10 per cent US tariff on its products, would face an additional 10 per cent tariff starting on March 4. He reiterated that the previously scheduled Reciprocal Tariff date of April 2 will remain in effect. 

Fund rotation ahead of MSCI rebalancing

 

MSCI's February 2025 rebalancing, effective after today's trading session, is expected to bring passive inflows of around $1 billion. 

 

Key changes include Hyundai Motor India being added to the MSCI Global Standard Indexes as the only Indian large-cap stock in this review, with the highest weight increase among Indian securities. 

 

Meanwhile, Adani Green Energy has been removed. 

 

Stocks like IndusInd Bank, Zomato, Varun Beverages, Mankind Pharma, and others saw weight increases. Meanwhile, the biggest weight decreases were seen in Adani Green Energy, RIL, ICICI Bank, Infosys, HDFC Bank, M&M, L&T, Bharti Airtel, and Axis Bank.

 

Across the board selling 

 

The broader market witnessed a major decline, with across-the-board selling pressures leading to a steep downturn. The Nifty SmallCap index plummeted 2.09 per cent, shedding 317.3 points to hit an intraday low of 14,839.30. Similarly, the Nifty MidCap index fell 1.89 per cent, losing 933 points and dipping to an intraday low of 48,203.75.

 

All major sectors were deep in the red, with the Nifty Metal, Realty, Auto, and Media indices being the hardest hit, each dropping up to 2.5 per cent. 

 

At 9:25 AM, Nifty Metal was down by 2.13 per cent, followed by Nifty Realty, which dropped 1.88 per cent, Nifty Auto down 1.89 per cent, and Nifty Media slipping 1.78 per cent. 

 

Additionally, the PSU Bank, IT, and Consumer Durables sectors also saw declines of up to 1.5 per cent, further indicating broad-based weakness across the market.

 

Persistent FII selling 

 

Foreign institutional investors (FIIs) net sold shares worth Rs 556.56 crore, while Domestic Institutional Investors (DIIs) net purchased shares totaling Rs 1,727.11 crore on February 27.

 

So far this year, FIIs have sold equities worth Rs 1,13,721 crore. In January 2025, they offloaded shares worth Rs 78,027 crore, and in February, they have sold Rs 35,694 crore as of now.

 Weak global cues  

Asia-Pacific markets were trading lower on Friday following US President Donald Trump's confirmation that tariffs on imports from Mexico and Canada will go ahead, taking effect next week.

 

Nikkei was down 2.81 per cent, while Topix slipped 1.87 per cent. ASX 200 and Kospi were down 1.03 and 2.74 per cent, respectively. CSI 300 was also trading 0.6 per cent lower.

 

In the US, all three major indexes closed lower. The S&P 500 dropped 1.59 per cent, ending at 5,861.57, continuing its downward trend for the week and month. 

 

The Nasdaq Composite fell 2.78 per cent, closing at 18,544.42, with Nvidia’s 8.5 per cent decline dragging the index lower. The Dow Jones lost 193.62 points, or 0.45 per cent, to finish at 43,239.50.

 

Additionally, Bitcoin's price fell 1.79 per cent, settling at $82,811.12, marking nearly a 25 per cent drop from its record high in January.

 

Market technicals

 

According to Jigar S Patel, senior manager of equity research at Anand Rathi, Nifty has key support at 22,000 and resistance at 22,500. A strong breakout above 22,500 could push the index toward 22,800. The short-term trading range is expected between 22,000 and 22,800. Additionally, a bullish butterfly pattern has formed near 22,300, indicating a potential reversal. 

 

“If the pattern plays out, it could support a bullish move, with 22,500 acting as a crucial breakout level. Traders should monitor price action near these levels, as a decisive move beyond resistance may confirm further upside momentum,” Patel added.