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 2,700 points and the Nifty falling 847 points.

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.

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.

All Sectors in Red

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.

"Going ahead, the 23170–23200 zone is expected to act as an immediate resistance for the index. As long as Nifty continues to trade below the 23200 mark, the downside pressure is likely to persist. In such a scenario, the index may drift towards 22850, followed by the 22700 level in the short term," Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities said.

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.

"Bank Nifty ended below the key 53,500 mark, forming a bearish candlestick that highlights continued selling pressure. From a technical perspective, the recent bounce after the sharp fall appears limited, reaching only the 23% Fibonacci retracement, indicating weak buying interest. Additionally, a hidden bearish divergence on the RSI points toward a likely continuation of the prevailing downtrend. The index may head towards the 52,000 level in the near term. On the upside, resistance is seen at 54,500, while immediate support is placed around 53,000. A sell-on-rise approach remains favorable below 56,200 levels," Vatsal Bhuva, Technical Analyst at LKP Securities said.

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

Shriram Finance, Eternal and HDFC Bank were the top three losers in Nifty50. Similarly, Eternal was the top loser in Sensex, followed by Bajaj Finance and HDFC Bank.

What Led the Fall?

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.

"The Nifty slipped sharply after a few days of strong closing as the resurfacing of intense conflict between the US–Israel and Iran spooked the market.... The RSI has entered a bearish crossover and is falling, suggesting increasing bearish momentum.... Going forward, a decisive fall below 23,000 might trigger further downside towards 22,700 or even lower. On the other hand, a decisive move above 23,000 could push the index towards 23,350," Rupak De, Senior Technical Analyst at LKP Securities said.

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.