Indian stock markets faced a third consecutive day of losses on June 3, 2025, with the Sensex and Nifty 50 declining sharply due to global trade uncertainties, foreign fund outflows, and high valuations.
Mumbai: The Indian stock market experienced a significant downturn on June 3, 2025, with the BSE Sensex crashing 636 points, or 0.78%, to close at 80,737.51, and the NSE Nifty 50 falling 174 points, or 0.70%, to settle at 24,542.50. The decline, which saw an intraday low of 80,575.09 for the Sensex and 24,502.15 for the Nifty, wiped out ₹2.50 lakh crore in investor wealth, reducing the market capitalization of BSE-listed firms to ₹443 lakh crore.
Global Trade Tensions Weigh Heavy
The market’s fall was primarily driven by weak global cues, exacerbated by U.S. President Donald Trump’s announcement of 50% tariffs on steel and aluminum imports, effective June 4, 2025, impacting Indian exporters like Tata Steel and Hindalco. These tariffs, coupled with fears of a U.S. recession, led to a sell-off in Asian markets, with Japan’s Nikkei dropping 2.81% and South Korea’s Kospi falling 2.74%. Analysts noted that Trump’s erratic trade policies, including a potential call with Chinese President Xi Jinping to address U.S.-China trade tensions, added to global uncertainty, dampening investor sentiment.
Foreign Capital Outflows Intensify
Foreign portfolio investors (FPIs) sold Indian equities worth ₹9,000 crore over the last two sessions, driven by a stronger U.S. dollar and rising U.S. bond yields, which hit an 18-month high. This follows a massive ₹1.13 lakh crore withdrawal by FPIs in 2025, with ₹78,027 crore offloaded in January alone. “The relentless FII selling and global uncertainties related to Trump’s tariffs are major headwinds,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. Domestic institutional investors, however, provided some cushion, absorbing the selling pressure.
High Valuations Spark Caution
Concerns over stretched valuations further fueled the decline. The Nifty 50’s price-to-earnings (P/E) ratio of 22.6 exceeds its one-year average of 22.15, signaling overvaluation, particularly in mid- and small-cap segments. “High valuations in the broader market, coupled with persistent retail investment, suggest Indian equities may remain elevated, but corrections are inevitable,” Vijayakumar noted. The BSE Midcap and Smallcap indices fell 0.52% and 0.07%, respectively, reflecting broader market caution.
Tepid Q4 Earnings Disappoint
The Q4 FY25 earnings season failed to inspire confidence, with growth under 6% year-on-year, below market expectations. Motilal Oswal Financial Services reported that forward earnings revisions showed more downgrades than upgrades, particularly in IT and financial sectors. Heavyweight stocks like Infosys, ICICI Bank, and L&T were among the top drags, with the Nifty IT index dropping 1.5%. “The lack of fresh triggers and muted earnings growth are keeping markets in a consolidation phase,” said Ajit Mishra, SVP of Research at Religare Broking.
Geopolitical Risks Add Pressure
A fresh escalation in the Russia-Ukraine conflict, following Ukraine’s drone strikes on Russian airfields, contributed to market jitters. Ross Maxwell, Global Strategy Operations Lead at VT Markets, highlighted that the war’s impact on energy prices and inflation continues to reshape investment flows. Rising crude oil prices, with Brent crude nearing $80 per barrel, further strained sentiment, particularly for oil-dependent sectors like auto and manufacturing.
Market Outlook and RBI Policy Watch
Analysts anticipate continued volatility as markets await the Reserve Bank of India’s (RBI) Monetary Policy Committee meeting on June 6, 2025. A widely expected 25-basis-point rate cut may not significantly lift sentiment, as it is already priced in. Rupak De, Senior Technical Analyst at LKP Securities, noted that 24,500 is a critical support level for the Nifty, with a breach potentially dragging it to 24,000. A recovery above 24,700 could spark a rally toward 24,750. Posts on X reflect bearish sentiment, with users citing FII outflows and global jitters as key concerns, though some highlight buying opportunities in PSU banks and pharma.