Why did the Indian stock market fall today? Explained

On Tuesday, May 13, 2025, the Indian stock market saw a significant downturn. The Sensex plummeted by 1,282 points, or 1.55%, closing at 81,148.22, while the Nifty 50 ended down by 346 points, or 1.39%, at 24,578.35. Here’s a breakdown of the key factors contributing to the market decline:

Tariff Concerns Resurface

India’s proposal to impose retaliatory tariffs on the U.S. over President Donald Trump’s steel and aluminum tariffs has reignited concerns over a trade war. This issue remains unresolved, despite ongoing negotiations between the U.S. and India, leading to market uncertainty.

Profit Booking After a Strong Rally

Following a sharp 4% rally driven largely by short covering after easing tensions between India and Pakistan, retail investors were seen booking profits. The rally had been largely speculative, and the lack of institutional backing suggested the market might struggle to maintain momentum in the days ahead.

US-China Trade Deal Impact

The U.S.-China trade deal has sparked worries that foreign investors might shift their capital from India to China, reigniting the 'sell India, buy China' trend. This could lead to renewed foreign capital outflows from Indian equities, weighing heavily on market sentiment.

Lingering Indo-Pak Tensions

Despite Prime Minister Modi’s address urging caution towards Pakistan, the market remains anxious about the ongoing geopolitical tensions. The interception of drones and military activity along the border is adding to investor unease, keeping a shadow over market performance.

Lack of Fresh Catalysts

The market is currently devoid of strong positive triggers. With India’s economic outlook and expected earnings recovery largely priced in, retail investors are shifting their focus from large-cap stocks to mid- and small-cap stocks in search of higher returns. However, many may be overlooking factors like valuation comfort and management quality, increasing the risk of short-term volatility.

Overall, these factors combined have contributed to the Indian stock market’s slump, resulting in a significant loss in market capitalization and investor wealth.

Disclaimer: Investors are advised to consult certified experts before making any investment decisions, as market conditions can change rapidly.