On February 28, 2025, the Indian stock market witnessed a significant downturn, with the BSE Sensex plunging 1,014.08 points (-1.36%) to 73,598.35 and the NSE Nifty slipping 300.45 points (-1.33%) to 22,244.60. This sharp decline reflects a mix of domestic and global factors unsettling investor sentiment.

What Led to the Market Crash?

Several key factors contributed to the market turbulence on February 28:

1. Weak Earnings from Indian Banks: Disappointing quarterly results from major banking institutions have dampened investor confidence, leading to sector-wide selling pressure.

2. Foreign Investors Pivoting to China: With global investors reassessing their portfolio allocations, Foreign Institutional Investors (FIIs) have begun reallocating funds from Indian equities to China, further straining market stability.

3. Rising US Bond Yields: The increase in US Treasury yields has made American assets more attractive, drawing capital away from emerging markets like India.

4. MSCI Rebalancing Impact: Adjustments in the MSCI index led to a shift in institutional investments, affecting market liquidity and stock weightage.

5. Uncertainty Over US Trade Policies: Recent tariff-related statements from former US President Donald Trump have created uncertainty in global trade. Markets generally react negatively to protectionist policies, and fears of trade restrictions have contributed to the bearish sentiment.

6. Strengthening US Dollar Hurting Emerging Markets: The US dollar index hit 107.35, making foreign investments in India more expensive. A stronger dollar also increases India’s import costs, particularly for crude oil, putting pressure on the rupee and overall market sentiment.

What’s Next for the Markets?

Market analysts expect short-term volatility to persist, with key factors such as global economic data, interest rate decisions, and corporate earnings influencing investor sentiment.

Experts recommend staying cautious, diversifying portfolios, and focusing on fundamentally strong stocks to navigate the uncertain market conditions.