Benchmark equity indices slumped sharply on Monday as heavy selling pressure dragged markets lower amid rising global and domestic risks. The S&P BSE Sensex was down 454.71 points at 85,257.66 around 12.35 pm, while the NSE Nifty50 slipped 168.80 points to trade at 26,017.65.
Broader markets mirrored the weak sentiment, with mid-cap and small-cap stocks witnessing sharper cuts than frontline indices.
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Intraday volatility also spiked, signalling heightened nervousness on Dalal Street.
Sectorally, PSU banking stocks led the decline, joined by selling in realty and chemical stocks. Weak institutional flows and profit-booking in interest-rate sensitive segments weighed on sentiment.
FII SELLING HITS SENTIMENTS
Foreign institutional investor (FII) selling remained a major drag on the market. According to V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, the sustained depreciation of the rupee has been forcing FIIs to continuously sell Indian equities, keeping pressure on benchmark indices.
He also flagged the recent spike in Japanese bond yields as another emerging global risk. A sharp rise in yields could trigger fresh unwinding of the yen carry trade, potentially accelerating outflows from emerging markets like India.
“In brief, there is potential for high volatility in the near term,” Vijayakumar said.
POSITIVE FUNDAMENTALS VS NEAR-TERM RISKS
Despite the day’s sell-off, Vijayakumar noted that India’s macro fundamentals remain supportive over the medium term. The economy posted a strong 8.2% GDP growth in Q2, while the Reserve Bank of India has revised its FY26 GDP growth forecast upward to 7.3%.
He added that although low inflation has pulled down nominal GDP growth and near-term corporate earnings, leading indicators suggest that around 15% earnings growth is achievable in FY27, which remains constructive for equities.
VOLATILITY LIKELY TO STAY
For now, markets remain caught between strong domestic growth signals and mounting global risk factors, particularly currency weakness, FII outflows, and bond yield volatility overseas. With both positive and negative triggers in play, analysts expect elevated volatility to persist in the near term.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
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