DeepSeek Triggers US Selloff, PM Modi Speaks To Trump, RBI Measures For Liquidity

The launch of DeepSeek has sparked a significant selloff in global tech stocks, impacting major US AI-related companies. This disruption is primarily due to the introduction of a new open-source large language model by the Chinese AI startup, founded by quant fund Chief Liang Wenfeng.

DeepSeek’s model is gaining recognition for its performance, which rivals the offerings of leading companies like Nvidia, OpenAI, and Meta, all while being much cheaper. This challenges the perception of US technological dominance given its ability to operate using less advanced chips, thus evading US-imposed restrictions on high-end semiconductor exports to China. Notably, DeepSeek’s application recently topped the Apple App Store rankings.

This launch led to a selloff affecting several major stocks, with companies such as Nvidia, Meta, and Microsoft seeing substantial declines. Nvidia, in particular, experienced a staggering market capitalization reduction of $593 billion, marking a record single-day loss for any Wall Street firm.

Additionally, the tech-heavy Nasdaq Composite index fell more than 3%, while the S&P 500 slipped 1.5%. Conversely, the Dow Jones Industrial Average gained nearly 300 points. Bond yields saw a decrease, and the US dollar appreciated amid a search for safer investments. In the Asia Pacific market, trends were mixed, with the Nikkei 225 reporting over a 1% drop.

Meanwhile, it was reported that DeepSeek will temporarily halt new registrations due to a recent cyberattack that affected user access. The company has rectified several issues concerning their application programming interface and website access, according to updates from their status page.

In other developments, Indian Prime Minister Narendra Modi announced via social media that he had spoken with US President Donald Trump, who has recently been inaugurated. Modi extended his congratulations to Trump on his historic second term, assuring that both leaders are dedicated to nurturing a beneficial partnership between the United States and India.

Domestically, the Reserve Bank of India (RBI) has introduced a series of measures aimed at enhancing liquidity within the financial system. These actions include open market operations, along with variable rate repo auctions and interventions in the foreign exchange market, expected to inject about ₹1.5 lakh crore into the banking system.

Given the tight liquidity conditions, the RBI intends to conduct open market purchase auctions for government bonds worth ₹60,000 crore, scheduled in three phases on January 30, February 13, and February 20. Additionally, a 56-day variable rate repo auction targeting ₹50,000 crore is planned for February 7, along with a dollar-rupee buy-sell swap auction of $5 billion scheduled for January 31.

Ahead of the upcoming Monetary Policy Committee meeting, these measures are perceived as precursors to a potential interest rate cut.

In corporate news, wealth and asset management firm 360 One WAM Ltd. announced plans to acquire merchant banker and mutual fund distributor Batlivala & Karani Securities India Pvt. for ₹1,884 crore. This acquisition, which includes ₹200 crore in cash and equivalents, is structured as a combination of a stock swap and part-cash transaction, pending regulatory approvals.

Investors should keep an eye on stocks like Infosys, 360 One WAM, Bank of Baroda, Wipro, and Tata Power.

DeepSeek, PMModi, RBI