Indian Stock Market Crash: Sensex Falls 5,035 Pts, Nifty Drops 1,453 Pts From Peak; Can Budget Revive Bulls?

Indian stock market continues to witness a relentless bloodbath in January so far. On January 21, Sensex erased the 82,000 mark, and Nifty dipped under 25,000 before struggling to hold momentum, tracking weak global cues. The month of January is facing an intense global trade war and geopolitical tensions, with the latest feud escalating between the US and the European Union over Greenland. The NATO countries' alliance is grimmer, as US President Donald Trump applies pressure with more tariff threats.

Sensex, Nifty On January 21:

In the early deals, Sensex nosedived by 1,056.02 points to hit an intraday low of 81,124.45 on January 21, while Nifty 50 plummeted by 312.7 points to hit the day's low of 24,919.80.

Currently, the market has recovered some losses.

Why Indian Market Is Falling?

As per Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, there is risk-off sentiment in global markets now in response to Trump's Greenland policy, the threatened tariffs on eight European countries and Europe's hardening anti-Trump stance.

Globally stock markets are down and the flight to the safety of gold is up. There is no clarity on how the situation will evolve. If the threatened tariffs come into effect, Europe will retaliate and this will lead to a trade war with bad consequences for global trade and global growth.

If such a scenario plays out, Vijayakumar believes, stock markets will witness further selling.

"On the other hand, if Trump chickens out as he had done in the past, or succumbs to pressure, markets will rebound. A combined and united Europe has many options like the much talked about 'Sell America' wherein they sell US treasuries leading to sharp fall in dollar. This will hurt Trump. Public opinion in US is also against Trump's Greenland annexation plan. Many unexpected developments can happen and the market is likely to react strongly to the developments," said Vijayakumar.

Following the extreme bearish trend, Sensex and Nifty have crashed significantly from their peak levels.

Sensex, Nifty Performance From Peak:

Sensex touched its all-time high of 86,159.02 on December 1, 2025, and Nifty extended its gaining momentum to hit new record high of 26,373.20 on January 5, 2026.

From their peak levels, Sensex plunged by a whopping 5,034.57 points and Nifty 50 are down by 312.7 points if compared with January 21st session's low.

In 2025, Nifty 50 index recorded a 10.5% jump. This year saw positive performance from midcap stocks whose index surged by nearly 6%, but the small-cap index dropped by nearly 6% during the year. Large-caps broadly led the gains with metal stocks emerging as top performers due to a strong surge in commodity prices.

(IMAGE Source: HDFC Securities)

But the year 2026 has started bearish, with Sensex down by 4% and Nifty 50 down 2.4%.

Also, foreign portfolio investors have pulled out a whopping Rs 32,253.55 crore in January 2026, which is already on the move to breach the selloffs of Rs 34,349.62 crore in December 2025.

Coming to the rupee, the Indian currency has touched a new all-time low to 91.4860 against US dollar amid continued foreign capital outflows and the latest geopolitical tensions.

The next big event for India is the upcoming Union Budget 2026, which will be announced by Finance Minister Nirmala Sitharaman on February 1, 2026.

Can Union Budget 2026 Revive Bulls For Stock Market?

"Globally we are experiencing a volatile market period and I expect the upcoming budget to keep various scenarios in mind and their potential impact on our economy," said Sandeep Bagla, CEO of TRUST Mutual Funds.

For the Budget 2026, he is expecting policies to be accretive to infrastructure growth with continued levies in capital incentive segments to boost future economic development.

From a global investor perspective, while tariffs remain a challenge, the government is working on strengthening relations with countries that boost trade and ease capital flows into the Indian economy.

Other critical factors would be taking a stand on measures that lend some support to fiscal consolidation and direct investments in sectors which can strengthen long-term growth potential for the Indian economy and cushion it from potential geopolitical shocks.

While Bagla expects growth to pick up in certain pockets of the economy, he continues to be cautiously optimistic on Indian market for FY27.

"We expect markets to be earnings result driven and we expect stronger positive results from individual stocks based on results and fundamentals, rather than overall sectors," he said.

Globally, lower inflation, rate cuts will help growth. The U.S. Federal Reserve has already cut rates three times in 2025 and is expected to ease further in 2026, which should support global liquidity and risk appetite. Also, commodity prices, particularly crude oil, have softened, easing inflationary pressures for India.

Overall, he said, while India's domestic economy is relatively insulated, global macro developments-especially U.S. monetary policy, oil prices, and geopolitical events-will continue to influence market sentiment and capital flows.

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