Why did the Sensex just crash by 600 points?
₹2.5 lakh crore lost
Hey everyone,
Welcome to your Tuesday edition of Bharat.Inc.
Today’s big headline? The Indian stock market is having a serious case of the blues, and investors just lost ₹2.5 lakh crore in a single session.
Let’s unpack what went wrong (and what might come next)…
📌 Here’s why the Dalal Street is bleeding
On Tuesday, June 3, the Indian stock market took a major hit, dragged down by weak global cues, foreign capital outflows, and worries over sky-high valuations.
The Sensex opened at 81,492.50 but dropped nearly 800 points intraday to touch 80,575.09. It finally closed at 80,737.51, down 636 points or 0.78%.
The Nifty 50 wasn't spared either; it opened at 24,786.30 and closed at 24,542.50, falling 174 points or 0.70%.
This marks the third consecutive day of losses.
And it's not just about numbers on a screen; investors lost ₹2.5 lakh crore in market cap, with BSE-listed companies now worth ₹443 lakh crore (down from ₹445.5 lakh crore).
Here are 4 key reasons behind the crash:
1. Overstretched valuations
Overstretched valuations refer to stocks being priced much higher than their actual earnings justify. Currently, the Nifty 50's price-to-earnings (PE) ratio is above its one-year average, signaling potential overvaluation.
This raises concerns among investors about whether the market is due for a correction. VK Vijayakumar of Geojit notes that although retail investor activity remains strong, the broader market, especially mid and small-cap stocks, is starting to look overheated.
In simpler terms, people are paying too much for future growth that may not materialize soon, making the market vulnerable to sharp pullbacks if sentiment shifts or earnings disappoint.
2. US trade policy turbulence
Global investors are growing cautious due to the unpredictable nature of U.S. trade policies. Recent erratic tariff decisions, particularly under Trump's influence, have raised concerns about stability in global trade.
The situation is further complicated by rising tensions between the U.S. and China. Accusations are flying from both sides, with China accusing the U.S. of breaching trade agreements, and the U.S. warning of more restrictions.
High-level diplomatic talks are being scheduled, but until concrete outcomes emerge, the uncertainty is likely to persist, keeping investors on the sidelines and adding to market volatility across the globe, including in India.
3. Foreign capital outflow
Foreign Portfolio Investors (FPIs) have withdrawn nearly ₹9,000 crore from Indian equities in just two trading sessions.
This sudden outflow is largely due to rising U.S. bond yields, which make American assets more attractive, and concerns over India's high market valuations. When foreign investors sense better returns or lower risk elsewhere, they tend to pull money out of emerging markets like India.
According to Ajit Mishra of Religare Broking, this trend, combined with ongoing global uncertainties like trade tensions and geopolitical risks, is creating heavy pressure on the Indian stock market and contributing to its recent decline.
4. No fresh triggers
The market is facing a lull due to the absence of fresh positive triggers.
While Q4 results were mostly stable, they didn’t exceed expectations or boost sentiment.
Additionally, hopes of a 25 basis point rate cut by the RBI on June 6 are already priced in, leaving little room for surprise.
With no new catalysts to drive buying interest, investors are opting to wait and watch. Until stronger earnings, bold policy changes, or global stability emerge, the market may continue to drift or correct. In short, it's a pause driven more by uncertainty than panic.
According to Rupak De (LKP Securities), all eyes are on the 24,500 level for Nifty. If it breaks, we may see a quick slide to 24,000. But if it holds, expect a bounce back to 24,750.
So, that’s it for today. If you enjoyed this edition, subscribe to hear from us every day!
See ya 👋
