The Indian stock market reeled under intense selling pressure on Friday, February 13. The benchmark Sensex crashed over 900 points during the session, and investors lost about ₹7 lakh crore in a session as the overall market capitalisation of BSE-listed firms dropped to nearly ₹465.50 lakh crore from ₹472.50 lakh crore in the previous session.
Why is the Indian stock market falling?
The following key factors are behind the sharp selloff in the Indian stock market:
1. Global selloff
Weak global sentiment is also spilling into the domestic market. After an over 2% crash in the Nasdaq overnight, major stock indices in China and Japan crashed over a per cent, largely due to growing noise around AI-led disruptions in the technology sector.
2. Rising US bond yields, dollar
Stronger-than-expected US jobs data has elevated US Treasury yields and the dollar, weighing on market sentiment. The dollar index and US 10-year bond yield rose over 0.20% during February 13’s session.
3. Fed rate cut hopes dwindle
Expectations of a US Fed rate cut in March or April have waned significantly following strong US jobs data. An elevated period of interest rates in the US may harden yields and lift the dollar, which may translate into foreign capital outflow from the Indian stock market.
Data showed on Wednesday that the nonfarm payrolls rose by 1,30,000 jobs in January, after a downwardly revised 48,000 increase in December, while the unemployment rate declined to 4.3%.On Thursday, weekly data showed initial jobless claims fell to 2,27,000 in the week ended February 7, according to Reuters.
Investors now await US inflation data due later on Friday for more cues on the Fed’s interest rate trajectory.
4. Q3 earnings season ending without any major surprises
The December quarter results season is going to end in the next few days. So far, a majority of major companies across sectors have delivered their results. The numbers have been stable and mixed, which has failed to trigger a sharp rebound in the market.
5. Geopolitical uncertainties
Investors continue keeping a close eye on geopolitical developments amid a lack of fresh positive triggers back home.
According to a Wall Street Journal report, the US is sending its largest warship to the Middle East. The Wall Street Journal quoted two US officials saying that the “US is sending the largest and most advanced aircraft carrier to the Middle East, as Washington steps up plans for a potential attack on Iran.”
Is the stock market panic overblown?
The stock market has valid reasons to fret over. However, many experts believe the panic is overblown as the domestic macro fundamentals are intact and uncertainties over the AI and geopolitical conflicts will gradually ease.
“While uncertainties persist, it does look slightly overblown to me, especially considering the kind of carnage we’ve already seen in the last 2–3 sessions,” Ajit Mishra, SVP of Research at Religare Broking.
“The market reacts very quickly to headlines. Someone says some AI tool has a free plugin that can handle legal compliance or automate processes, and investors start reacting without even checking how reliable the product is or what the output actually looks like. Yesterday, US IT stocks were under pressure. So, are we saying that big US-based companies were unaware of such developments? That seems unlikely. So the reaction does feel exaggerated,” Mishra explained.
The stock market dislikes uncertainty and ambiguity. The recent selloff is a knee-jerk reaction to uncertainties over how AI is going to shape not only the tech sector but the overall economy.
AI will certainly have an across-sector impact, but this won’t happen overnight. Businesses are complex and take time to adapt.
What should stock investors do in this market?
Experts say this is the time to gradually increase exposure to stocks, as the current market remains a stock-pickers market.
“It is a stock-picker’s market. Even in a weak market, good companies can outperform. In the near term, it’s a market to protect wealth. But over the long term, it can still become a wealth-creating phase,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
According to Mishra, banking, auto, metals, and select energy counters are still attractive.
The rest of the market is showing rotational participation—some sectors bounce temporarily, but the core strength is in these 3–4 areas.
“In equities, especially large caps and even mid caps, after the earnings season, valuations don’t look overstretched. If someone has a long-term horizon, they don’t need major modifications. For example, if someone is holding 70% equities, 20% bullion, and 10% debt, that allocation is completely fine,” said Mishra.
Market performance will ultimately be influenced by earnings growth, which is expected to be healthy for the coming quarter due to India’s healthy growth-inflation dynamics. That will reflect in stock prices, too, say experts.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
