Sensex and Nifty Plunge: Key Reasons Behind Today’s Selloff and ₹8 Lakh Crore Market Wipeout - Read Now

The Indian stock market incurred heavy losses on Friday, October 25. BSE Sensex had tumbled 800 points at least, and Nifty had slipped to the region of 24,150. It had reduced the aggregate market capitalization of all the listed BSE firms down to ₹436.1 lakh crore from ₹ 8 lakh crore. What has led the key reasons behind this sharp decline of today's market can be enumerated as follows:

1. Slightly weak Q2 Earnings Pressure Benchmark Indices
The negative tone was set by the Q2 earnings season of a few blue-chip companies. NTPC went down by 4% after the quarterly results that did little justice to the expectations whereas the its banking counterpart IndusInd Bank fell by 19% and pulled down the Sensex by as much as 130 points. Slashed FY25 earnings forecast has brought about analysts in bearish sentiment due to these disappointing Q2 earnings. "The weak numbers have soured sentiment," noted Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

2. Persistent FII Sell Extending Market Psychology
The market has declined because of sustained FII selling. FIIs have been selling Indian shares for 19 days. Until October 24, they had sold ₹98,085 crore worth of Indian shares. Much of that money has been drained to China, where foreign funds are being lured away from India due to stimulus packages and relatively lower valuations

3. Higher US Bond Yields and a Strong Dollar Drag Indian Market Downside
High US bond yields and a firming US dollar have also dented India's market prospects. The 10-year US Treasury yield remained above 4%, while the dollar index remained firm at 104.06. These factors normally deter foreign inflows into emerging economies, such as India, as US assets are perceived as more attractive due to a better US yield.A firming dollar also raises import costs, which tends to squeeze corporate margins.

4. US election adds uncertainty
Another uncertainty has been added to the market by the looming US election. The US vote is scheduled for November 5, and the prospects of the Republican candidate Donald Trump have been creating fears about the inflationary tax and tariff policies. The speculations about the win for Donald Trump have buoyed the higher US yields that indirectly affects global markets, including India.

5. Fading Hopes for Aggressive Rate Cuts
Expectations that the US Federal Reserve will cut its rates have dissipated. Market pricing currently suggests a 95.1% chance of a 25 basis point cut when Fed officials meet in November, from an earlier assumption of potentially cutting its benchmark rate by 50 basis points. This dampens the sentiment in equity markets that had hoped for more aggressive cuts to boost economic activity.

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