The Indian equity markets saw a sharp downturn in the intraday session today, erasing early gains and slipping firmly into negative territory. The Sensex tumbled more than 1,400 points, or over 1.7%, to trade around 82,300, while the Nifty dropped over 400 points or 1.6% to hover near the 25,400 mark.
Market veteran Deepak Jasani summed up the mood, saying, “Overall there is still apprehension in the markets and the fact that the Nifty is unable to hold 26,000 is a key concern. The FII sentiment is once again seeing a negative bias. After being net buyers in early February, they have again turned net sellers after the results season. The broader market continues to show weak signs, and the index heavyweights have also taken a hit. The only saving grace is that there have been no sharp bouts of sell-off today.”
Apart from domestic factors, investor sentiment has also turned cautious due to rising global tensions. Reports suggesting that the United States military could carry out a strike on Iran as early as this weekend have added to market nervousness. Traders are closely tracking developments in the United States-Iran situation, as any escalation could impact global crude oil prices, currency movements and overall financial market stability.
Here are 5 key reasons triggering today’s fall-
Broad-based selloff across segments
Mid-cap and small-cap shares also came under pressure. The BSE mid-cap and small-cap indices declined by more than half a percent each.
The fall also impacted investor wealth significantly. During the session, the overall market capitalisation of companies listed on the BSE dropped sharply, leading to a notional erosion of thousands of crores in market value.
Valuation concerns in small and midcaps
Even though mid- and small-cap stocks had recently shown signs of recovery after the third-quarter results, concerns about high valuations continue to linger.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted, “An important takeaway from Q3 results is the comeback of the mid and smallcaps. Improvement in earnings recovery and indications of continuation of this uptrend have brought the mid and smallcaps back to the radar of investors. At the institutional level, there is a trend of selective accumulation of mid and smallcaps. Even mutual funds which had flagged the valuation concerns of the mid and smallcaps have started approaching the segment with optimism. However, even now, largecaps have valuation comfort while mid and smallcaps are trading at much higher valuations. Nifty is trading at around 20 times FY27 estimated earnings while the NSE midcap and NSE smallcap indexes are trading at 28 and 24 times estimated FY27 earnings. This makes this market a stock picker’s market. Prospects for financials, autos, capital goods, pharmaceuticals and hotels look good.”
Sectoral weakness drags indices lower
Another key factor behind the fall is the widespread decline across sectors. Most sectoral indices were trading in the red.
The Nifty Auto, Fast-Moving Consumer Goods (FMCG), Media and Realty indices were down more than 1%. Financials, metals and consumer durables also saw notable declines.
Heavyweights and key losers under pressure
The majority of stocks within the Nifty 50 index were trading lower. Shares such as Kwality Wall’s, Trent, Mahindra & Mahindra, and Adani Enterprises were among the notable losers during the session.
In the Sensex pack, stocks including Trent, Mahindra & Mahindra, InterGlobe Aviation (IndiGo) and UltraTech Cement were also down between 1-2%.
Infosys and Tata Consultancy Services managed to hold marginal gains.
Rising volatility signals nervousness
Adding to the pressure was a sharp rise in volatility. The India Volatility Index, commonly known as India VIX, surged more than 9% during the session and has risen over 10% in the past five days.
The India VIX measures market expectations of near-term volatility. A rising VIX usually indicates increasing fear or uncertainty among investors. Higher volatility often leads to cautious trading behaviour and risk reduction.