Kospi Crash To IT Selloff: What Dragged Indian Markets Lower Today

Indian benchmark indices suffered their biggest single-day decline in nearly two weeks on Tuesday as a combination of weak global cues, a sharp technology selloff and renewed concerns over the US interest-rate outlook triggered broad-based profit booking.

The BSE Sensex ended 893.39 points, or 1.16%, lower at 76,200.68, while the NSE Nifty 50 declined 278.80 points, or 1.16%, to settle at 23,824.10. The sharp reversal came after a positive start to the session, with the Sensex rising as much as 101 points to 77,194.83 and the Nifty touching an intraday high of 24,135.50.

The selloff erased nearly ₹5.77 lakh crore in investor wealth as the total market capitalisation of BSE-listed companies fell to around ₹474 lakh crore.

Kospi Crash Sends Shockwaves Across Global Markets

One of the biggest triggers behind Tuesday's decline was the sharp correction in South Korea's benchmark Kospi index.

The Kospi plunged as much as 10%, forcing the Korea Exchange to halt trading for 20 minutes after market-wide circuit breakers were triggered. Semiconductor giants Samsung Electronics and SK Hynix tumbled nearly 13% and 12%, respectively, amid concerns that the rally in AI-linked technology stocks had become excessively stretched.

The South Korean market had been among the world's best-performing indices this year, driven largely by enthusiasm around artificial intelligence and semiconductor demand. The sudden reversal rattled investor sentiment globally and triggered risk-off behaviour across equity markets.

The weakness also spread to US futures, with technology stocks remaining under pressure ahead of Micron Technology's earnings later this week, which investors view as a crucial test for the sustainability of the AI-driven semiconductor rally.

Fed Rate Hike Fears Return

Investor nervousness was compounded by growing expectations that the US Federal Reserve may resume policy tightening later this year.

Bank of America significantly altered its outlook and now expects the Fed to deliver three rate hikes in 2026, compared with its previous expectation of no change. The brokerage forecasts a cumulative 75 basis points of tightening across September, October and December, taking the benchmark rate to 4.25%-4.50%.

The shift reflects concerns around persistent inflation and a resilient US labour market.

Higher US interest rates generally strengthen the dollar, lift Treasury yields and reduce the attractiveness of emerging-market assets. Such a scenario can potentially lead to foreign capital outflows from markets like India as investors shift allocations toward higher-yielding US assets.

The dollar index remained above 101, near a one-year high, while the rupee weakened marginally to close at 94.7350 against the US dollar.

IT Stocks Resume Their Decline

The domestic technology sector once again emerged as the biggest casualty.

After staging a brief recovery on Monday, IT stocks resumed their downward trajectory amid concerns over slowing technology spending and growing AI-related disruption risks.

Infosys, TCS, Wipro and HCL Technologies fell up to 3.5%, dragging the Nifty IT index more than 2% lower.

The latest round of selling follows Accenture's decision last week to trim the upper end of its annual revenue growth guidance. The revision has raised concerns that global enterprises continue to defer discretionary spending on large digital transformation and consulting projects.

Given that Indian IT companies derive a substantial share of their revenue from North America and frequently compete with Accenture for large contracts, investors remain concerned that a prolonged slowdown in client spending could affect earnings growth.

Profit Booking After Strong Rally

Tuesday's decline also reflected profit booking after a strong market rally over the past several sessions.

Indian equities had recovered sharply from their March lows, supported by easing crude oil prices, moderating geopolitical risks in West Asia, improving rupee stability and a slowdown in foreign investor selling.

However, stretched short-term valuations and weak global cues encouraged investors to lock in gains.

Vinod Nair, Head of Research at Geojit Investments, said market sentiment weakened as early gains proved unsustainable amid negative global developments.

"Profit booking after the recent rally further intensified downside pressure, resulting in broad-based weakness across key sectors," he said.

Nair noted that metals witnessed the sharpest decline due to weaker global commodity prices and concerns about demand, while the domestic IT sector remained under pressure because of the global technology selloff and fears around AI-led disruption.

Bear Market Warning

Adding to market nervousness, veteran investor Marc Faber warned that Indian equities could correct by as much as 20% from current levels.

In an interview with Business Standard, Faber argued that India may have entered a bear market phase and suggested earnings expectations could eventually disappoint investors.

His comments come despite India's strong economic growth trajectory and relatively cheaper valuations compared with peak levels seen in 2024.

The caution contrasts with a recent Barclays report, which described India as one of the most under-owned markets globally despite remaining the fastest-growing major economy.

According to Barclays, India's weight in the MSCI Emerging Markets Index has fallen sharply from nearly 20% at its 2024 peak to below 12%, making it the largest underweight position among emerging-market portfolios.

Technical Outlook Remains Constructive

Despite the sharp fall, technical analysts believe the broader market structure remains intact.

Rupak De, Senior Technical Analyst at LKP Securities, said the Nifty has weakened in the short term after breaking below its previous swing low and slipping beneath the 50-hour exponential moving average.

However, he pointed out that the index found support at a key rising trendline connecting multiple recent highs and lows.

According to De, immediate resistance is placed at 23,950-24,000, while crucial support remains at 23,700. A break below that level could trigger a deeper correction.

Gold, Rupee And What Investors Should Watch

Jateen Trivedi, VP Research Analyst at LKP Securities, noted that gold prices remained under pressure as the stronger dollar and rising rate-hike expectations weighed on bullion demand.

He said markets are closely monitoring developments around US-Iran negotiations and next week's US non-farm payrolls and unemployment data, which could influence expectations around Federal Reserve policy.

For Indian investors, attention is likely to remain focused on four key variables in the coming weeks: the trajectory of US interest rates, the health of the global AI trade, progress of the southwest monsoon and the direction of foreign institutional flows.

While easing crude prices and lower geopolitical risks continue to provide support, Tuesday's selloff highlighted how quickly global developments can alter market sentiment and trigger sharp corrections after an extended rally.