On April 7, 2025, Indian equity markets witnessed a sharp and broad-based sell-off as escalating global trade tensions and recessionary fears triggered panic among investors. The BSE Sensex plummeted 2,226.79 points (2.95%) to close at 73,137.90, while the Nifty 50 shed 743 points (3.24%) to end at 22,161.60. Mid- and small-cap indices bore the brunt, with the BSE MidCap falling 3.46% and the BSE SmallCap plunging 4.13%, reflecting heightened risk aversion across the board. The market downturn was primarily driven by geopolitical uncertainties following U.S. President Donald Trump’s announcement of a sweeping tariff regime targeting over 180 countries.
In a rapid escalation, China responded with its own set of tariffs on U.S. goods, fueling fears of a full-blown global trade war. This intensified selling pressure worldwide, with sharp declines in major global indices such as Japan’s Nikkei 225 falling 7.83%, the Hang Seng in Hong Kong dropping 13.22%, and the S&P 500 and Dow Jones in the U.S. closing nearly 6% and 5.5% lower, respectively. The cascading effect spilled into India, disproportionately impacting export-oriented sectors such as information technology and automobiles. Tata Motors shares crashed nearly 13% after its UK-based subsidiary, Jaguar Land Rover, temporarily halted exports to the U.S.
Amid this global rout, sector-specific headwinds further deepened investor concerns. The IT sector slumped due to fears of reduced tech spending in recession-hit Western markets. The auto sector also took a hit, not just from export disruptions, but from broader concerns about declining global demand. Financial services and metal stocks were not spared either, reflecting a generalized aversion to riskier assets and cyclical sectors in the face of global economic uncertainty.
One of the key contributors to the market fall was aggressive foreign selling. On April 7, 2025, foreign institutional investors (FIIs/FPIs) sold equities worth ₹22,412.28 crore while buying only ₹13,372.27 crore, resulting in a net outflow of ₹9,040.01 crore. In contrast, domestic institutional investors (DIIs) emerged as net buyers, purchasing ₹26,528.23 crore worth of equities against ₹14,405.78 crore in sales, contributing a positive net inflow of ₹12,122.45 crore. However, this domestic support wasn’t sufficient to offset the scale of foreign selling, which dragged benchmark indices sharply lower.
Domestically, caution also stemmed from uncertainty surrounding the upcoming Reserve Bank of India (RBI) monetary policy meeting on April 9. With global headwinds increasing, market participants are hoping for a dovish tilt or a possible rate cut to support domestic growth. However, lack of clarity on the central bank’s stance further dampened sentiment. Additionally, the India VIX, a key indicator of market volatility, spiked by 66% to 22.8, signaling extreme fear and anxiety among investors.
In total, 3,494 stocks declined on the BSE, and 775 hit 52-week lows, underscoring the breadth of the sell-off. While DIIs tried to stabilize the market with strong buying, the overwhelming selling by foreign investors, coupled with global and domestic economic uncertainty, created one of the sharpest single-day declines in recent months. As investors await further clarity from central banks and global policymakers, markets are expected to remain volatile in the days ahead.