This morning, 28th Aug 2025, stock investors woke up in shock as they saw the stock market crash by 700 points. This sudden decline affects the investor’s confidence in investing in stocks in the future. The BSE Sensex fell sharply by about 600–700 points, making it one of the biggest single-day drops in recent months. At the same time, the Nifty50 slipped below the key 24,550–24,600 level, showing rising market volatility and investor worries.
This sudden crash wiped out recent market gains and raised questions about what caused it, whether global economic issues, geopolitical tensions, or domestic factors. For traders and investors, it was a clear reminder of how quickly markets can change when key events take place. In this Blog, we will give you a clear, concise about the sudden crash of the stock market, along with trying to discover the responsible factors behind it.
What is Sensex?
The SENSEX or Stock Exchange Sensitive Index is India’s primary stock market benchmark, launched in 1986 by the Bombay Stock Exchange (BSE). It tracks the performance of 30 Big and actively traded companies across sectors such as banking, IT, energy, and FMCG, making it an important aspect of the Indian economy. A rise in the Sensex reflects a surge in investor confidence and optimism about the economy, while a fall indicates fear, uncertainty, or negative market sentiment.
How does the Sensex Crash?
A Sensex crash is a sudden and steep fall in the index, often dropping by hundreds or even thousands of points within a short time. The reasons for the market fall are:
- Global Market Trends – Declines in US, European, or Asian markets often drag Indian markets down.
- Economic Indicators & Policies – Slow GDP growth, rising inflation, or unfavorable policy changes weigh on investor sentiment.
- Geopolitical Tensions – Wars, conflicts, or trade disputes (like tariffs) create uncertainty and drive investors away.
- Corporate Earnings – Weak financial results from major companies can shake market confidence.
- Foreign Investor Outflows – Heavy selling by FIIs can accelerate market declines.
Importantly, a crash doesn’t always signal an economic collapse—it may also be a short-term correction caused by overvalued stocks or panic selling. Simplistically, the Sensex crashes when a mix of negative news, global worries, or domestic challenges triggers panic selling, causing stock prices to fall sharply.
Reasons for the Sensex Crash by 700 Points
As per the reports of the Economic Times, we are highlighting 5 major points behind the sudden market downturn. The fall wasn’t triggered by a single event, but rather by multiple developments unfolding at the same time.
1. Trump’s 50% Tariffs on Indian Goods
One of the biggest shocks came from the United States, which announced steep new tariffs on Indian imports. The U.S. increased duties by another 25%, taking the total tariff to 50% starting August 27. This decision immediately shook investor confidence as it posed a direct threat to India’s export-driven sectors.
Industries like Shrimp, Textiles, and Apparel were hit the hardest, with some company stocks tumbling nearly 12% in a single day, as per the data given by Mint. The move sparked worries about a long trade fight, which added more pressure on the overall market.
2. Heavy FII (Foreign Institutional Investor) Outflows
Another big reason for the fall was heavy selling by Foreign Institutional Investors (FIIs). Continuous withdrawals of foreign capital have already been a concern for Indian markets, and this round of selling added even more pressure. Such large-scale exits show that global investors are losing confidence in Indian equities, which increases market volatility. Experts also believe that investors are moving their money to safer assets because of global uncertainty.
3. Global and Asian Market Slowdown
The decline in Indian markets was also influenced by subdued performance in global stocks. Reports from Reuters noted that concerns over slowing global growth, along with negative signals from Asian markets, added further pressure. Since Indian equities often follow global trends, any weakness abroad tends to spill over into local markets, sparking worries about trade, capital flows, and overall economic growth.
4. Negative Technical Trends
Technical indicators added to the worries. According to Mint, the Nifty index fell below key support levels, including its 20-day moving average. This breakdown triggered automated selling and strengthened the negative outlook among traders. When indices break support levels, it often speeds up panic selling, as both retail and institutional investors expect more downside.
5. High Valuations & Weak Earnings Outlook
Analysts pointed out that stock prices had become too expensive compared to the expected earnings. Since corporate earnings growth is likely to stay low, investor confidence dropped further. This gap between high prices and weak earnings made the market fragile, where even small negative news, like poor results or policy changes, caused sharper falls in stock prices.
What Do the Latest Market Data Points Reveal About the Sensex Crash?
1. Sensex Drop Ahead of Tariffs: On August 26, just a day before the U.S. tariff hike came into effect, the Sensex had already slipped by more than 800 points.
2. Sharp Two-Day Decline: Over the course of just two trading sessions, the benchmark index tumbled by over 1,500 points, making it one of the sharpest short-term corrections in recent times.
3. Market-Wide Pressure: By the next morning, all 16 sectors were trading lower. Major players like HDFC Bank, ICICI Bank, and Reliance Industries also fell between 0.9% and 1.5%, adding to the broader market weakness.
What Stock Investors Should Expect Now?
Experts have predicted a few possible scenarios, which are listed below.
1. Tariffs Seen as Temporary Setback – Although the high U.S. tariffs hurt export-focused sectors, many analysts feel the impact may not last long. Ongoing diplomatic talks could help reduce tensions, and U.S. Treasury Secretary Scott Bessent has suggested optimism, noting that both countries are likely to “come together” to reach a solution.
2. Buying Opportunity for Long–term Investors – Even after the sharp fall, some fund managers view this as a good chance to invest, especially in strong blue-chip companies. They believe India’s growth story, rising consumption, and government spending plans remain solid, making the market attractive for investors with a long-term outlook.
3. Policy Support Could Stabilize Markets – Experts believe the Indian government might introduce supportive steps, like export incentives, reducing trade hurdles, or holding talks with the U.S. to lessen the tariff impact. These measures could restore investor confidence and help steady the stock market.
4. Global Developments Remain Crucial – The market’s direction will largely depend on U.S.-India trade talks, global growth trends, and Asian market performance. If tariffs rise further, deeper corrections may follow, but positive diplomatic signals could trigger a quick rebound.
FAQs
Q1. What is the reason for the Sensex falling?
Ans. The Sensex and Nifty dropped by around 1%, with overall market capitalization taking a notable hit. The fall was mainly driven by heavy FII (Foreign Institutional Investor) selling, a weakening rupee, and negative global cues.
Q2. What are the problems faced by the Indian Economy currently?
Ans. The Indian economy is dealing with many challenges right now. Prices are rising due to high inflation, the rupee is unstable, and the country has a large trade gap. At the same time, India needs to improve its infrastructure and create enough jobs and opportunities for its citizens.
Q3. Why are IT shares falling?
Ans. Indian stock markets witnessed a sharp decline on Friday, led by a heavy sell-off in IT stocks. Weak quarterly results from TCS, combined with rising global trade tensions, triggered the fall, dragging the broader market lower.
Q4. What affects the Sensex?
Ans. The Sensex is mainly influenced by macroeconomic factors like interest rates, inflation, and currency exchange rates. For example, when interest rates change, they affect how easily companies can borrow money and also impact overall market sentiment.
