Stock Market Crash: Why Did Sensex Drop 1,095 Pts & Nifty Fell By 290 Pts On Tuesday, May 13?

Stock Market Crash: After a strong surge of 3%, the Indian stock market crashed on Tuesday, May 13, with Sensex falling below 81,500 and Nifty struggling to hold around 24,700. Both benchmarks recorded more than 1% declines, with IT stocks dragging the most.

The bearish trend comes ahead of CPI and IIP data scheduled on Tuesday. Also, Sensex and Nifty toppled when Asian cues were in green, following a surge on Wall Street overnight.

"Expect dips early in the day, with the majority of Nifty constituents closing near their respective VWAPs. But if such dips are held above 24810, expect a resumption of uptrend aiming for 25075-126. The favored view sees a low probability of runaway moves in either direction," said Anand James, chief market strategist at Geojit Investments Limited.

Sensex, Nifty:

At the time of writing, Sensex and Nifty extended their early losses. Sensex traded at 81,458.04, down by 971.86 points or 1.18 %. Meanwhile, Nifty plunged by 256.40 points or 1.03 to perform at 24,668.30.

The benchmarks are near their intraday low. So far, Sensex has plunged by 1,093.86 points to hit an intraday low of 81,336.04, and Nifty has fallen by 289.8 points to hit an intraday low of 24,634.90.

Heavyweight stocks like Infosys, Eternal, Power Grid, HCL Tech, Kotak Bank, Asian Paint, TCS, HDFC Bank, ITC, Bharti Airtel, Tata Steel, and Nestle are top losers of the day, with declines of 1% to 3%.

"After the sharp surge in the market yesterday, mainly in response to the ceasefire, it is time to take stock and try to understand the likely direction of the market, going forward. It is important to understand that the sharp 916-point surge in Nifty was not caused by institutional activity. The combined FII and DII buying yesterday was only Rs 2694 crores. This means the market surge was triggered by short-covering and HNI plus retail buying. This implies that institutional activity is likely to remain subdued in the coming days which may constrain the continuation of the rally," Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments said.

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He added, "The agreement between US and China to reduce tariffs for 90 days signals the possibility of the end of the trade war between US and China. This augurs well for the global economy. Since the probability of a recession in the US has come down, Indian IT companies might benefit from the higher tech spending by US companies. Indian pharma exporters will face pricing pressure in the US from Trump's executive order reducing drug prices. This will impact their stock prices."

Bank Nifty plunged by 332 points, with Nifty FMCG, Nifty Auto and Nifty Financial Services down by 0.5% to 0.7%. IT stocks saw the most selling.

Nifty IT index plunged by 1.5%, with large-caps like Infosys, HCL Tech, Wipro, TCS down by 1.5% to 3%. Also, Oracle Financial Services and Mphasis stock dropped by over 1% and 2% respectively.

Asian stocks mirrored the gains in US equities, buoyed by optimism that the US-China trade truce signals the end of a full-scale tariff war. The resurgence in risk appetite followed Monday's announcement by trade negotiators from the world's two largest economies of a significant reduction in tariffs, highlighted by Geojit analyst.

Also, US markets surged, while gold and safe-haven currencies declined against a strengthening dollar on Monday, following the U.S. and China's agreement to temporarily reduce severe reciprocal tariffs and collaborate to prevent disrupting the global economy. European stock markets closed higher on Monday after that White House announced the U.S. and China had agreed to cut tariffs, it added.

Sensex and Nifty dropped during the time when crude oil prices soared by 1.5%, hitting two-week high. Also, on Monday, FIIs turned net buyers with inflow of Rs 1,246.48 crore in Indian equities, alongside DIIs that bought Rs 1,448.37 crore worth stocks.

Additionally, the Indian rupee rebounded past 85 per USD after having plunged to the one-month low of 86.2 on May 9th as the ceasefire between India and Pakistan eased concerns of escalating warfare and triggered rallies in their respective assets. This was after Indian forces struck Pakistani territory following terrorist attacks on Indian Kashmir last month, vowing more retaliation from both sides. The ceasefire recovered the relative safety of Indian assets in the region as their growing economy and relatively stable currency had driven a sharp influx of funds into domestic capital markets, according to Trading Economics data.

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