Sensex crashes 800 pts, Nifty below 24,700; 5 reasons for fall

Indian equity benchmarks, Sensex and Nifty50 declined sharply on Tuesday amid weak global cues, profit booking, and cautious sentiment among institutional investors.

The BSE Sensex ended the day with 873 points losses at 81,186, while the Nifty50 slipped below closed 24,700 level.

Across sectors, Nifty Bank, Financial Services, and FMCG were down nearly 1%, while Nifty Auto fell 1.6%. In the broader market, the Nifty Midcap100 dropped 0.8%, and the Nifty Smallcap100 lost 0.3%.

The total market capitalisation of BSE-listed companies declined by Rs 3.44 lakh crore to Rs 440.23 lakh crore.

Here are key reasons behind the fall:

1. Moody’s Downgrades US Government Rating
Global sentiment turned cautious after Moody’s downgraded the US government’s credit rating from AAA to Aa1 over rising debt concerns. The move sent bond yields higher, with the 30-year Treasury yield touching 5.03%, its highest since November 2023. The rise in yields has raised fears of reduced liquidity in global markets, which often impacts emerging markets like India.

2. FIIs Turn Net Sellers
Foreign Institutional Investors (FIIs) have turned cautious, pulling out Rs 526 crore on May 19, while Domestic Institutional Investors (DIIs) were also net sellers to the tune of Rs 238 crore. This marked the first instance in over a month where both FIIs and DIIs offloaded shares simultaneously.

Year-to-date, FIIs have been net sellers of Rs 1.09 lakh crore worth of Indian equities, while DIIs have purchased a net Rs 2.30 lakh crore, indicating a narrowing cushion from domestic flows.

3. Profit Booking After Recent Rally
The recent rally in Indian markets — which saw the Sensex and Nifty surge nearly 4% following the Operation Sindoor ceasefire — led to stretched valuations. In the past nine sessions, the market cap of BSE-listed firms jumped by Rs 27.3 lakh crore. Tuesday’s decline is partly attributed to investors booking profits at elevated levels.

4) Pressure from Heavyweight Stocks
Selling pressure in large-cap names dragged the indices lower. HDFC Bank, Reliance Industries, ICICI Bank, M&M, Maruti, and Bajaj Finance were among the top drags. Notably, shares of Eternal (formerly Zomato) fell nearly 4% amid concerns over a potential $1.3 billion outflow following the company’s move to become an Indian Owned and Controlled Company (IOCC).

According to Jefferies, Eternal may face MSCI exclusion due to foreign ownership nearing the regulatory limit of 46.5%. The stock currently has 44.8% foreign holding as of March, but analysts believe it may have risen closer to the threshold.

5) Nifty Looked Overbought on Charts

Analysts said Nifty appeared overbought in the short term, as Monday’s bearish candle and inside bar pattern reflected market indecision. On Tuesday, the index failed to hold above the 25,000 mark and broke the key support zone of 24,900–24,800, signaling weak momentum and prompting caution among traders.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)