The Indian stock market experienced a dramatic selloff on Monday, June 2, 2025, with the Sensex plummeting nearly 800 points and the Nifty 50 approaching the critical 24,500 level during intraday trading. This sharp decline has sent ripples through the investment community, raising concerns about market stability and future performance prospects.
The Sensex opened at 81,214.42 points, significantly lower than its previous close of 81,451.01, before dropping to an intraday low of 80,654.26 – representing a steep fall of 797 points or approximately 1 percent. Similarly, the Nifty 50 started trading at 24,669.70 against its previous close of 24,750.70, subsequently declining 0.91 percent to touch 24,526.15 during the morning session. Despite this broad-based weakness in large-cap stocks, the BSE Midcap and Smallcap indices demonstrated remarkable resilience, posting gains of around 0.30 percent each.
The primary catalyst behind this market turmoil stems from fresh trade tensions initiated by US President Donald Trump’s announcement on Friday regarding a significant tariff increase on imported steel and aluminum. Trump threatened to double these tariffs to 50 percent, effective June 4, 2025, creating uncertainty across global markets. This protectionist stance has reverberated throughout Asian markets, with Japan’s Nikkei and Hong Kong’s Hang Seng indices falling between 1-2 percent in response to the tariff announcement.
Market analysts view Trump’s tariff policy as a clear indication that trade relations will remain volatile and unpredictable, continuing to impact global market sentiment. Additionally, escalating tensions between the United States and China have further dampened investor confidence, with Bloomberg reporting China’s accusations that the US has violated their recent trade agreement and China’s vow to defend its interests.
Domestic factors have also contributed to the market decline, particularly profit-booking activities in heavyweight stocks that form the backbone of Indian indices. Investors appear to be taking profits in blue-chip companies such as HDFC Bank and Reliance Industries, which has exerted downward pressure on benchmark indices. This profit-taking behavior reflects a strategic shift among retail investors who are reallocating funds from large-cap stocks to mid- and small-cap segments, attracted by better earnings growth prospects in these categories.
The recent rally in mid- and small-cap stocks has been substantially supported by retail and high-net-worth individual participation, evidenced by surging trading volumes and increased mutual fund inflows into small-cap investment schemes. Vinit Bolinjkar, Head of Research at Ventura, notes that this trend isn’t merely speculative retail activity but reflects genuine earnings growth in companies connected to manufacturing, defense, railways, and infrastructure sectors.
Foreign portfolio investor behavior has emerged as another significant concern for market participants. FPIs have notably reduced their equity purchases in Indian markets, with data revealing net sales worth ₹6,449.74 crore in the cash segment during the previous trading session. This retreat by foreign investors can be attributed to a fresh uptick in the dollar index and stretched valuations of Indian equities, making alternative investment destinations more attractive.
The domestic market currently lacks compelling positive catalysts that could drive sustained upward momentum, keeping key indices trapped within established trading ranges. While strong economic growth outlooks provide medium- to long-term support for market sentiment, near-term triggers such as earnings growth acceleration and favorable geopolitical developments remain elusive, causing investors to adopt a cautious wait-and-see approach.
It is difficult to see a consistent pattern in earnings performance for those in the market. Although numbers from Q4FY25 exceeded initial hopes, Motilal Oswal is reporting that earnings estimates for the future are still showing weakness, with more downgrades happening than upgrades. Because earnings are not rising quickly, the market advance may slow, as some experts see key signals that earnings may improve, which could help restart vigorous market appreciation.
Based on technical analysis, experts in the stock market see the Nifty trading within a 24,650–24,900 range. Estimating his next move, Shrikant Chouhan notes that moving above 24,900 might encourage the Sensex to grow toward 25,150; however, going below 24,650 may affect market expectations and make the Sensex revisit 24,450 levels.
Short-term investors may find support at 20-day simple moving average and 24,650, as 25,150 will probably be viewed by bulls as a strong resistance zone. Should the index pass 25,150 or drop below 24,450, it could start a trend, heading close to 25,650 on the upside or getting close to 23,900 on the way down.
The ups and downs in this market prove that global financial markets are strongly connected and show how changes in international trade policies could influence how local stocks do. Experts recommend investors to use technical data and fundamental reasons together when managing their investments in these confused market conditions.
The next sessions are important as they will show if the Indian stock market will remain stable above main support points or fall further due to global conflict and investors selling.
