It was a bloodbath on Dalal Street.
On Tuesday, January 20, 2026, Indian stock markets suffered one of their sharpest single-day declines in recent memory. The BSE Sensex plummeted by over 1,000 points, while the Nifty50 crashed below the critical 25,250 mark—closing at 25,187. The trigger? A toxic cocktail of domestic tech underperformance and escalating global trade fears, reignited by none other than former U.S. President Donald Trump’s latest tariff threats .
As panic spread, investors rushed for the exits—not just from equities, but into traditional safe havens. Gold prices surged past ₹78,000 per 10 grams, while silver jumped nearly 4% in intraday trading. This clear flight to safety underscores a sudden and severe shift in market psychology.
Table of Contents
- What Happened During the Stock Market Crash?
- Top 5 Reasons Behind the Selloff
- Tech Stocks Lead the Downfall
- Foreign Investors Accelerate Selling
- Gold and Silver Soar as Safe Havens
- What Next for Indian Markets?
- Sources
What Happened During the Stock Market Crash?
The day began with muted optimism, but sentiment turned sharply negative by mid-morning. Heavy selling pressure emerged in IT and fintech counters, quickly dragging down broader indices. By 2:30 PM, the Nifty50 had breached 25,250—a psychological support level watched closely by traders.
Market breadth was deeply negative: over 4,200 stocks declined on the BSE, compared to just 650 gainers. Volatility (India VIX) spiked by 18%, signaling heightened fear among options traders .
Top 5 Reasons Behind the Selloff
While no single factor caused the crash, experts point to five interconnected drivers:
- Uneven Q3 earnings from tech giants: Infosys and TCS reported mixed results, with cloud growth slowing and margin pressures mounting.
- Donald Trump’s new tariff proposal: The former U.S. president announced plans to impose 60% tariffs on Chinese goods—and hinted at extending them to “all outsourced tech services,” rattling Indian IT firms .
- Continued FII outflows: Foreign portfolio investors pulled out ₹2,800 crore in January alone, marking the third straight month of net selling .
- Global risk aversion: U.S. Treasury yields rose, and Nasdaq futures dipped, creating a negative spillover effect.
- Overvalued market correction: Analysts argue the Nifty was trading at 22x forward P/E—well above its 10-year average—making it vulnerable to a pullback.
Tech Stocks Lead the Downfall
The IT sector bore the brunt of the crash. Key decliners included:
- Infosys: Down 6.2% after reporting stagnant deal wins.
- TCS: Fell 5.8% on concerns over pricing pressure in Europe.
- LTIMindtree & Tech Mahindra: Both dropped over 7% amid fears of reduced U.S. client spending.
Collectively, the Nifty IT index plunged 6.9%, its worst single-day fall since March 2023. This dragged down the broader index significantly, given the sector’s 13% weightage in Nifty50.
Foreign Investors Accelerate Selling
Foreign Institutional Investors (FIIs) have been net sellers in Indian equities for 11 of the last 12 months. In January 2026 alone, they offloaded over ₹8,200 crore worth of shares, according to data from depositories .
“Global macro uncertainty is driving capital back to U.S. shores,” explains a senior strategist at a Mumbai-based brokerage. “With Trump’s protectionist rhetoric resurfacing, emerging markets like India are seen as risky bets.”
Gold and Silver Soar as Safe Havens
As equities tumbled, precious metals shone. Gold prices on MCX jumped 2.3% to ₹78,450 per 10 grams, while silver rallied 3.8% to ₹89,200 per kg .
This classic “risk-off” rotation shows investors are prioritizing capital preservation over growth. Historically, such moves precede either a short-term bounce or a deeper correction—depending on whether the underlying triggers subside.
What Next for Indian Markets?
Analysts are divided. Some believe the stock market crash presents a buying opportunity, especially in quality midcaps now trading at discounts. Others warn that without a reversal in FII flows or clarity on U.S. trade policy, the downtrend could persist.
Key levels to watch:
- Nifty50 support: 25,000 (psychological) → 24,800 (200-DMA)
- Sensex support: 82,000 → 81,200
For long-term investors, this volatility is a reminder to diversify and avoid emotional decisions. As Warren Buffett famously said, “Be fearful when others are greedy, and greedy when others are fearful.” For more on navigating market turbulence, see our guide on [INTERNAL_LINK:how-to-invest-during-market-crashes].
Sources
- Times of India. “Stock market today: Nifty50, BSE Sensex crash on January 20, 2026.” https://timesofindia.indiatimes.com/…
- National Stock Exchange (NSE) and BSE official data, January 20, 2026.
- Securities and Exchange Board of India (SEBI) FII/DII statistics.
- MCX Gold and Silver price reports, January 20, 2026.
- Investopedia. “Understanding Risk-Off Sentiment in Financial Markets.” https://www.investopedia.com