Market Crashed and Revived: The 2-Day Anatomy of the Indian Stock Market

On April 7, 2025, the Indian and global markets crashed like never before. Nifty 50 was down by 3.24% to 22,161 points, and investors lost around ₹14 lakh crores of wealth. On Tuesday, the Nifty 50 turned green and rose by 1.69% to 22,535.85 points. In this blog, we’ll dig deeper into the reasons for the market crash on Monday and how it revived on the next trading day.

Why Did the Market Faced Black Monday?

Almost all the major stock markets from US, UK to China faced the heat of reciprocal tariffs. India’s stock market fall was driven by margin calls and winding up of leveraged bets by investors to protect their money from global uncertainty. So, here are the top 6 reasons that brought Black Monday to the Indian stock market:

1. US Market Fell Due to Tariffs

The US stock market fell due to reciprocal tariffs on imports, with the risk of higher inflation, and poor consumer spending. All these factors have triggered the possibility of a fall in the US economic growth, which is the world’s biggest importer.

The Fed also highlighted that the tariffs are higher than what is anticipated which can erode the US economic growth with higher inflation and unemployment. All these factors have led to a massive fall in the US market with the S&P 500 shedding 0.2% on Monday closing.

2. Global Stock Market Crashes

Other than that, all the major economies have witnessed the sharp sell-off due to the uncertainty around the impact of tariffs. Japan’s Nikkei 225 fell by 7.8%, China’s SHCOMP by 7.3%, the UK’s FTSE 100 by 4.4%, and Europe’s Stoxx 600 was down by 4.5%. This fall has clearly transferred to the Indian markets and put selling pressure on Indian equities as well.

3. Commodity Prices Down

Not just the stock markets, gold, crude oil, and other commodities have seen a noticeable drop in prices. The tariffs have hurt the demand from individuals and businesses, which has led to a fall in prices of commodities. Gold fell by 3%, Brent crude down by 6.5%, and the silver price by 7.3%.

Additionally, the rupee also slides by 60 paise as both the Indian and foreign investors rushed to withdraw their money before the implementation of tariffs. On April 7, FIIs bought shares worth ₹13,372 crores and sold shares worth ₹22,412 crores, with a net offloaded value at ₹9,040.01 crores.

4. Investors Move Towards Safer Instruments

In anticipation of a fall in equity markets, investors moved sharply towards the G-sec, which pushed down the 10-year US treasury yield by 8 basis points. India VIX rose by 66% (the highest single-day jump) at 22.8, highlighting the fear of investors and near-term uncertainty in the equity market.

5. Fear of Trade War

In retaliation for US tariffs, China has imposed 34% tariffs on all imports coming from the US. The US-China trade war could disrupt the supply chain, shift of base of manufacturing facilities, and impact the company’s profits. China, being the world’s biggest exporter, has imposed restrictions on the exports of rare earth magnets as well.

The US again has threatened to impose additional tariffs of 50% on Chinese imports. This tug of war between the two major economies has kept investors on the crossroads, leading to the biggest fall in the market.

6. Sectoral-Wise Impact

Almost all sectors faced the sell-off due to reciprocal tariffs and uncertainty about the export position to the US. Nifty Metal fell the most by 6.8%, Nifty Realty down by 5.7%, and Nifty Private Bank was down by 3.5%. Other than this, defense, media, automobiles, healthcare, and infrastructure also experienced a decline on Black Monday.

Why Nifty Rose to 22,535 Points on Tuesday?

On April 8, 2025, the Nifty 50 got the relief from the Monday selling hiatus and rose by 374.25 points to 22,535.85. This recovery was led by bargain hunting by investors, improved investor sentiment, and trade talks between the US and other economies. Here are the detailed reasons why the markets revived from the previous day’s crash:

1. Sectoral Indices Witness a Jump

Nifty Bank rose by 1.31%, Nifty Auto by 1.63%, and Nifty IT was up by 1.76%. This trend shows that the market has weighed in on the threat of tariffs, and there is strong optimism among the investors. Both Nifty Midcap 100 and Nifty Smallcap 100 rose by around 2%, highlighting that the investors’ interest is rising just beyond the large-cap stocks.

2. Stabilisation of Tariff Uncertainty

India VIX index fell by 10.31% to 20.44 on Tuesday’s closing, highlighting that the investors’ fears have trimmed. Indian markets have rebounded by replicating the Asian markets’ performance on the back of the less aggressive tariffs comparatively.

Japan’s Nikkei rose by 5.6% amidst the news of the meeting between the U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer to negotiate trade terms with Tokyo.

Besides the China-US trade war, Hong Kong’s Hang Seng rose by 1.7% and China’s CSI 300 was up by 0.6%. This has provided support to global markets and relief to investors’ cautious approach.

3. Bargain Buying by Investors

The investors went on to buy equities after the valuations had fallen at a moderate level from the Monday crash. Nifty 50 PE ratio fell to 20.1, which is near the 5-year low PE of 18.92. Nifty Mid Cap 100 was down by 13.02% while Nifty Small Cap 100 also fell by 15.64% over the last 6 months. This clearly creates an opportunity for investors to buy stocks at the bargain prices.

4. Expectation of Monetary Easing by RBI

There is a high anticipation that the RBI will ease the repo rate by 25 basis points amidst falling CPI inflation and to support economic growth. This will pull down the borrowing costs, leading to higher spending and investment in the economy.

5. Weaker Dollar and US Bond Yields

The US dollar index is still below the 103 mark and US 10-year bond yields have also fallen to 4.15%. This provides support to the emerging economies like India. This makes Indian equities more appealing for the foreign investors which can raise inflows to the market.

Conclusion

While India will face the stress of 26% reciprocal tariffs from the US, India is still at a benefit as China, Vietnam, and Indonesia will face much higher tariffs. India might benefit from the higher exports to the US and the shift of the supply chain to India from bigger tariff economies.

Also, the bilateral trade talks between India and the US can provide some relief in key export-focused sectors. India’s domestic metrics such as inflation and GDP are still comforting, with the RBI expected to announce a repo rate cut. Overall, India’s growth story is still stable amidst growing global uncertainties. So, open free Demat account with SMC Global Securities and start investing after considering your risk profile and investment objectives.

Author: All Content is verified by SMC Global Securities.