India’s equity markets extended their sharp decline on Tuesday, capping a bruising two-day selloff that wiped out nearly ₹10 lakh crore in investor wealth. Escalating global trade tensions, sustained foreign fund outflows, and caution ahead of the Union Budget weighed heavily on market sentiment.
The benchmark S&P BSE Sensex has fallen more than 1,000 points over the past two sessions, while the NSE Nifty 50 dropped around 1%, slipping below the key 25,400 level. The selloff reflects a broader risk-off mood as investors grapple with geopolitical uncertainty and weak domestic cues.
Global sentiment deteriorated after US President Donald Trump threatened to impose tariffs on eight European nations, intensifying fears of a renewed trans-Atlantic trade war. The dispute, reportedly linked to Washington’s aggressive stance over Greenland, has prompted the European Union to prepare retaliatory tariffs on $108 billion worth of US goods if a proposed 10% levy takes effect on February 1.
Market experts warn that volatility may persist in the near term. “The uncertainty surrounding the US-Europe standoff is likely to keep markets on edge,” said V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments. “With both sides taking firm positions, clarity may take time to emerge.”
Foreign institutional investors (FIIs) have continued to pare their exposure to Indian equities, compounding the pressure on domestic markets. FIIs have sold shares worth over ₹29,000 crore so far this month. According to analysts, a weakening rupee and concerns over the progress of a potential India-US trade agreement are driving the sustained outflows.
Domestic factors have offered little support. Corporate earnings for the December quarter have been largely muted, with several companies reporting subdued performance. The one-time impact of newly implemented labour codes has further weighed on profitability, leaving investors disappointed by the lack of positive surprises.
Caution is also building ahead of the Union Budget 2026, scheduled for February 1. While expectations remain high for measures to stimulate consumption, concerns over fiscal discipline and the possibility of lower government capital expenditure have kept risk appetite subdued.
As equity markets struggle, investors are increasingly turning to safe-haven assets. Gold and silver prices have climbed to record highs, reflecting a shift toward defensive positioning amid rising geopolitical risks and uncertain growth prospects.
