HMPV virus, Trump inauguration, FII selling: Why Sensex crashed 1400 points

From FII selling to fears around HMPV virus, here's why the Indian markets crashed on Monday, January 7, 2025

The Indian market collapsed in trade on Monday, January 6, 2025. The BSE Sensex slumped 1,441.49 points or 1.8 per cent and logged an intraday low at 77,781.62, similarly, the National Stock Exchange (NSE) Nifty tanked 452.85 points or 1.88 per cent to the day's low at 23,551.90. At close, on BSE, Tata Steel, Kotak Mahindra Bank, NTPC, Power Grid, Zomato were among the top laggards. All sectoral indices traded finished the session in red. 

Here are a few reasons why the market is crashing today:

Fears around HMPV virus

Gaurang Shah, head investment strategist, Geojit Financial Services believes fear around the Human Metapneumovirus (HMPV) is dragging the Indian markets.

 

 

"After the Covid pandemic, the entry of the HMPV virus is denting the market sentiments," said Shah.

 

As per reports, the Indian Council of Medical Research (ICMR) has detected two cases of HMPV in Karnataka.  Both cases were detected at Bengaluru's Baptist Hospital.

 

HMPV is a common respiratory virus that causes lower and upper respiratory infections (like a cold). It is a seasonal disease that usually occurs in the winter and early spring, similar to Respiratory Syncytial Virus (RSV) and the flu. 

Rupee depreciation

As per G Chokkalingam, Founder, Equinomics Research Pvt Ltd depreciation of the Indian Rupee against the US dollar is a concerning market.  

The dollar eased on Monday but held close to a two-year peak, as traders awaited a raft of the US economic data this week headlined by December's nonfarm payrolls report for further clues on the Federal Reserve's rate outlook.

 

The dollar has continued to draw strength from expectations of fewer Fed cuts this year, with its climb to a two-year high last week pushing the euro to its weakest level in more than two years.

 

Also providing the dollar with additional safe-haven support was uncertainty over U.S. President-elect Donald Trump's plans for hefty import tariffs, tax cuts and immigration restrictions upon his inauguration on Jan. 20. 

The rupee depreciation continued during the week as the currency ended 24 paise lower at 85.78 per dollar on January 3 against the December 27 closing of 85.54. On January 6, 2025, around 12:58 PM, the Rupee made an intraday low of 85.76. 

Trump inauguration

US President-elect Donald Trump will take office on January 20 after defeating Democratic candidate Kamala Harris in November's presidential election. As per Shah, Trump hiking tariffs will be a concern for markets.

 

Trump has threatened to slap tariffs of at least 10 per cent on goods from China and to impose levies of 25 per cent on products from both Mexico and Canada, prompting importers like Reynolds to import early to avoid higher costs that are often passed on to consumers, as per reports.  Further, expectations of a stronger US markets during Trump Presidency is driving investors to 'sell India and buy US equities'. As per Reuter, analysts at Goldman Sachs noted the S&P 500 boasted a total return of 25 per cent in 2024, the second year of gains above 20 per cent and the last time that happened was 1998/99. The rally was narrow, with almost half the rise coming from just five stocks, yet Goldman expects another 11 per cent increase this year driven by a similar rise in earnings. 

FII selling

Foreign Institutional Investors (FIIs) net sold (Indian) equities worth Rs 4,227.25 crore on January 3, 2024.  Meanwhile, in January 2025, FIIs withdrew Rs 4,285 crore in the first three trading sessions.

 

"FIIs would wait for Budget outcomes before making any significant decisions. They would also wait for local currency to stabilize before committing any significant investments. Therefore, their selling may continue till the Budget is presented or even till March 2025," said Chokkalingam.

Weakness in European and Asian markets

Asia-Pacific slipped with Japan's Nikkei down 1.47 per cent, Hong Kong's Hang Seng down 0.52 per cent, China's mainland CSI 300 down 0.14 per cent and Shanghai down 0.14 per cent.  Similarly, the United Kingdom's FTSE was down 0.44 per cent.

Broader markets underperform

Broader market indices were trading in firm red in trade. Around 1:35 PM, BSE Midcap was down over 2.11 per cent and BSE Smallcap was down 2.81 per cent. On National Stock Exchange (NSE), Nifty Midcap 100 was down 2.31 per cent and Nifty Midcap 100 was down 2.58 per cent.   IREDA, Gujarat Fluorochemicals, Hindustan Petroleum were among the top losers on BSE Midcap index, while, on BSE Smallcap Jai Corp, Ashoka Buildcon, Siyaram Silk Mills were among the top losers.  

Nervousness ahead of GDP estimates

Three weeks before the Union Budget for FY26, the National Statistics Office will release the first advance estimates of gross domestic product (GDP) for FY25 on January 7 amid a moderation in growth expectations.  

 

Experts, however, say resilience in rural demand, along with sustained agricultural and services-sector output, will keep India on a growth path towards achieving 6.4-6.8 per cent expansion in FY25. 

Technical view: 

"On January 3, 2025, Nifty traded within a narrow range of 24,150-23,980, forming a very tight CPR for January 6, 2025. The two-day CPR relationship showed an "inside day," signalling a potential big move ahead. In today’s session, Nifty opened within the CPR but failed to close above it intraday, creating a bearish bias," said Jigar S Patel, senior manager - technical research analyst, Anand Rathi Shares and Stock Brokers. 

Patel added: The RSI on the 15-minute chart consistently stayed below 50, further indicating weakness and a rapid fall. Moving forward, support is expected near 23,600, while resistance lies at 24,000. These technical factors suggest caution, as the market remains poised for volatility, particularly if key support or resistance levels are breached.