The Indian stock market is facing continued pressure, with the Sensex tumbling over 600 points intraday on Friday, July 25, to hit a low of 81,546.04, while the Nifty 50 dropped nearly 1% to 24,844. Over the last two sessions, the Sensex has plunged around 1,200 points (1.4%), and the Nifty 50 has declined by 1.5%.

Broader markets were hit even harder — the BSE Midcap index fell 1%, while the Smallcap index dropped 1.4%. By 10:45 AM, the Sensex was down 561 points (0.68%) at 81,623, and the Nifty 50 slipped 196 points (0.78%) to 24,866.

This sharp fall has wiped out over ₹7 lakh crore of investor wealth in just two days. The total market capitalisation of BSE-listed companies fell from ₹460.35 lakh crore on July 23 to about ₹453 lakh crore. On Friday alone, the market cap dropped by ₹5 lakh crore, down from ₹458.11 lakh crore in the previous session.

Why Is the Market Falling?

Experts have identified five key reasons behind this recent market downturn:

1. Delay in India-US Trade Agreement

There’s uncertainty over the conclusion of a trade deal between India and the US. While negotiations are ongoing and progress has been reported, no concrete agreement has been reached. The US has already signed deals with countries like Japan, Indonesia, Vietnam, and the Philippines.
The major sticking point remains the US pushing for access to Indian markets for agricultural, dairy, and genetically modified (GM) products — which India is hesitant to allow to protect its farmers.
Commerce Minister Piyush Goyal, however, has expressed optimism, stating that the discussions are making "fantastic" progress.

2. Persistent Foreign Capital Outflows

Foreign Portfolio Investors (FPIs) have been aggressively offloading Indian equities. So far in July, FPIs have sold ₹28,528 crore in the cash segment, including ₹11,572 crore in just the last four days.
Analysts suggest that high valuations are deterring foreign investors, even though India's macroeconomic fundamentals remain strong.
Santosh Meena, Head of Research at Swastika Investmart, stated that FIIs are cautious due to premium valuations, despite improving economic indicators.

3. Disappointing Q1 Earnings

The Q1 results for FY26 have not met expectations. Many companies, especially in the IT and financial sectors, have underperformed.
While a modest quarter was anticipated, conservative outlooks and management commentaries have further dampened investor sentiment.
According to Meena, the lack of positive surprises in earnings and the unresolved trade deal have added to market pessimism.

4. Overstretched Valuations

Analysts believe the market is currently trading at valuations that are difficult to justify, especially in the broader segment.
While the Nifty 50 is within reasonable valuation levels, the mid- and small-cap segments appear overheated.
VK Vijayakumar of Geojit Financial Services warns that the broader market weakness may persist, especially in small-cap stocks where valuations have become unsustainable.

5. Technical Weakness: Nifty Falls Below Key Support

From a technical perspective, the 25,000 level was a key support for Nifty 50. Its breach suggests further downside risk.
Akshay Chinchalkar from Axis Securities pointed out that the formation of two bearish engulfing candlesticks in a row indicates heightened selling pressure — a rare and negative technical signal.
He noted that 24,800–24,735 is the immediate demand zone, while 24,500 is a crucial support level. If the selling continues, the Nifty could potentially test its 200-day moving average near 24,000.
On the upside, resistance is seen around the 20-day moving average (25,300).