Frontline indices, the Sensex and the Nifty 50, extended losses for the second consecutive session on Tuesday, January 6, on booking profit despite positive global cues.
The Sensex declined over 500 points, or more than 0.60%, to an intraday low of 84,900.10. The NSE counterpart Nifty 50 dropped by 0.50% to an intraday low of 26,124.75. However, the indices pared some losses, as the Sensex ended with a loss of 376 points, or 0.44%, at 85,063.34, while the Nifty 50 settled at 26,178.70, down 72 points, or 0.27%.
The BSE Midcap and Smallcap indices lost 0.24% and 0.39%, respectively.
The overall market capitalization of BSE-listed firms dropped to 479 crore from near 481 lakh crore in the previous session, making investors richer by about 2 lakh crore in a single session.
The domestic market declined even as global cues were largely positive. In Asia, Japan’s Nikkei, Korea’s Kospi and China’s Shanghai Composite Index rose by over a percent each.
What drove the Indian stock market down?
Let’s take a look at five key factors behind the fall in the domestic market benchmarks:
1. Reliance, HDFC Bank drag the index
Losses in shares of index heavyweights Reliance Industries and HDFC Bank dragged the benchmarks lower. Reliance shares crashed 5% in intraday trade, while those of HDFC Bank declined over 2% during the session, keeping the benchmarks down.
Reliance shares have been down amid the ongoing US-Venezuela episode, while HDFC Bank shares have been down after the bank disclosed its Q3 business updates.
2. Foreign capital outflow
The continuous selloff of Indian stocks by foreign institutional investors (FIIs) keeps market sentiment weak.
FIIs have been selling Indian equities since July 2025 in the cash segment, and over these last six months, they have cumulatively sold off Indian stocks worth nearly 1.85 lakh crore.
In just three trading sessions of January (till the 5th), they have sold off Indian stocks worth over 3,000 crore in the cash segment.
“The key reason behind the market weakness is sustained selling pressure from FIIs. They remain extremely negative on India due to last year’s underperformance and what they see as premium valuations compared with other global markets. Unless corporate earnings show a meaningful and sustained improvement, FII selling may continue,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
3. Caution ahead of Q3 earnings
The Q3FY26 earnings season has started with some small companies ready to disclose their December-quarter numbers on January 6.
Large companies, such as Avenue Supermarts (DMart), will announce their Q3 earnings on January 10, while IT majors TCS and HCL Tech will announce their results on January 12.
Indian corporates, barring a few exceptions, have been reporting weak earnings since mid-2024. While expectations are high that Q3 results will show an improvement, investors appear cautious ahead of the actual outcome.
4. Fresh tariff warnings from Trump
US President Donald Trump has issued a fresh warning regarding tariffs on India for importing Russian oil.
According to media reports, Trump has warned that Washington can raise tariffs on India due to Russian oil purchases.
Trump, on January 5, speaking to reporters, said, “We could raise tariffs on India if they don’t help on the Russian oil issue”.
“Trump has indicated that fresh tariffs on India are possible, which has unsettled markets. Earlier, there was optimism that India would be among the first countries to sign a trade agreement with the US, but recent comments have reintroduced uncertainty,” said Vijayakumar.
5. Caution due to geopolitical factors
Although the US-Venezuela conflict is not perceived as a major negative for the Indian stock market, there are concerns that further escalation could add to geopolitical complexity. As a result, investors are avoiding riskier equities and shifting funds to safe-haven assets to navigate the period of uncertainty.
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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.
