Nifty slides below 25k; VIX spikes 12%; what's driving the D-St rout?

The sell-off on Dalal Street showed no signs of easing on Wednesday, with benchmark indices Nifty50 and Sensex sliding over 1 per cent to their lowest levels in more than three months, while market volatility jumped over 11 per cent.

 

The Nifty50 fell past the psychological mark of 25,000, tumbling as much as 1.24 per cent or 312 points. The 30-stock Sensex gauge tumbled 1.3 per cent or 1,056 points or 81,124.4. Since the Nifty's record high on January 5 this year, the index is down 5.4 per cent. 

 

The fall has taken the index below its 200-day moving average (200-DMA), and has slipped 4.3 per cent thus far in January 2026, the biggest monthly fall since January 2016. India's volatility gauge -- India VIX -- rose over 12 per cent to the highest level since June 2025. 

 

   

Meanwhile, the broader market fell alongside the frontline packs, with the Nifty Midcap 100 and Nifty Smallcap 200 indices down 1.8 per cent and 1.3 per cent, respectively. The mid and small-cap indices are at their lowest since October 2025 and May 2025, respectively.  CATCH STOCK MARKET UPDATES TODAY LIVE 

On Wednesday, out of 4,314 stocks traded on the BSE, only 866 advanced versus 3,047 declines, underscoring broad-based selling beneath the index level. Around 159 stocks remained flat.

Why are Indian stock markets falling?

Geopolitical tensions: Global markets are witnessing a risk-off mood amid concerns over US President Donald Trump's stance on Greenland, his tariff threats against eight European nations, and a firmer anti-Trump posture emerging from Europe, analysts said. Trump levied a 10 per cent tariff on eight European countries, effective February 1, rising to 25 per cent in June, as they opposed his plans to acquire Greenland. 

 

There is no clarity on how the situation will evolve. If the threatened tariffs come into effect, Europe will retaliate, and this will lead to a trade war with bad consequences for global trade and global growth, VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said. 

 

Global markets drop: Globally, stock markets are down, and the flight to the safety of gold is up, analysts said, as there is no clarity on how the situation will evolve. 

 

Wall Street posted its worst session since April's crash last year, according to Bloomberg, with volatility reaching its highest level since November of the previous year. The S&P 500 and the Nasdaq indices closed over 2 per cent lower. 

 

Rupee at record low: The Indian rupee slumped to a new low of 91.39 against the US dollar on Wednesday amid persistent global fund outflow from domestic equity markets. The domestic currency fell 41 paise to a fresh low of 91.39 against the greenback. 

 

The Indian rupee also reacts to the unwinding of yen-carry trade as yields on Japanese long-dated government securities are trading at multi-decade highs amid political uncertainty. 

 

FPI selloff and muted Q3 show: Foreign portfolio investors (FPIs) continued to offload Indian equities with a total selling of ₹29,135 crore so far this month. This comes after FPIs ended 2025 with a net selling of ₹1.66 trillion. Additionally, the results of early-bird companies in October-December 2025 (Q3FY26) have shown just single-digit growth in revenue.