What’s Behind Stock Market Crash? Sensex, Nifty Plunges Over 3%

The Indian stock market witnessed a sharp plunge on Thursday, with benchmark indices Nifty 50 and Sensex each falling by more than 3%. By 3 pm, both indices had declined by around 3%, with the Sensex dropping 2,594 points and the Nifty falling 748 points.

The decline is attributed to a combination of rising Brent crude prices, persistent selling by Foreign Institutional Investors (FIIs) and a hawkish stance adopted by the US Federal Reserve.

The Sensex opened 1,953 points lower at 74,751, while the Nifty 50 fell over 580 points to 23,198. The sharp sell-off wiped out more than ₹10 lakh crore from the total market capitalisation of all companies listed on the BSE, bringing it down to ₹429 lakh crore.

All 16 major sectoral indices on the Nifty traded in the red, with financial and banking stocks declining by around 3.5% each, led by heavy selling in HDFC Bank. Broader markets also remained under pressure, as the Nifty Smallcap 100 and Nifty Midcap 100 indices fell by about 3% each. The Nifty Midcap 50 and Nifty Smallcap 50 declined by 3.51% and 3.26%, respectively.

Among sectors, the Nifty Auto index recorded the steepest fall, plunging around 4.51% as of 3 pm.

Brent crude prices rose sharply, with the global benchmark gaining 3.77% to reach USD 111.4 per barrel, adding pressure to market sentiment. At the same time, FIIs extended their selling streak, offloading equities worth Rs 2,714.35 crore on Wednesday, reflecting continued caution among overseas investors.

The US Federal Reserve kept interest rates unchanged but maintained a hawkish stance, highlighting risks stemming from elevated energy prices. Higher US rates typically reduce the attractiveness of emerging markets like India for foreign investors.

Market volatility also increased significantly, as the India VIX, commonly known as the market’s fear gauge, jumped over 16% to 21.72, indicating heightened expectations of near-term fluctuations.

Adding to the negative sentiment, global cues remained weak. Major Asian indices, including South Korea’s Kospi, Japan’s Nikkei 225, China’s SSE Composite, and Hong Kong’s Hang Seng, were trading notably lower, while US markets had closed sharply in the red on Wednesday.