Benchmark stock market indices experienced a significant decline on Monday due to intense selling pressure driven by increasing global and domestic uncertainties. The S&P BSE Sensex dropped by 722.60 points to 84,989.77 by 1:51 pm, while the NSE Nifty50 fell by 250.85 points, settling at 25,936.45.
The broader market sentiment mirrored the negativity, with mid-cap and small-cap shares witnessing more pronounced declines compared to leading indices. Intraday volatility surged, indicating heightened unease among investors.
The decline was led by the selling pressure in PSU banking, realty, and chemical stocks. Weak institutional investments and profit-taking in segments sensitive to interest rates further dampened market sentiment.
Foreign institutional investors (FIIs) continued to offload Indian equities, exerting downward pressure on the market. The sustained rupee depreciation compelled FIIs to maintain their selling spree, impacting benchmark indices. Additionally, the recent surge in Japanese bond yields posed another global risk. A significant increase in yields could prompt unwinding of the yen carry trade, potentially leading to capital outflows from emerging markets like India.
Despite the day’s market downturn, V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, highlighted the positive medium-term macro fundamentals of India. The economy recorded a robust 8.2% GDP growth in Q2, with the Reserve Bank of India revising its FY26 GDP growth projection to 7.3%. Although low inflation has affected nominal GDP growth and immediate corporate earnings, leading indicators suggest a potential 15% earnings growth in FY27, which bodes well for equities.
Presently, the market faces a balancing act between strong domestic growth indicators and escalating global risk elements such as currency devaluation, FII outflows, and bond yield fluctuation abroad. With conflicting triggers at play, analysts anticipate continued high volatility in the short term.