The Indian stock market came under heavy selling pressure on Thursday, with the Sensex falling more than 1,000 points by 2 pm and the Nifty slipping below 22,300.
The selloff erased around Rs 9 lakh crore from the market capitalisation of BSE-listed companies within hours. The total market capitalisation dropped from Rs 4,71,86,292 crore at the opening to Rs 4,62,71,545 crore by 1:45 pm.
Foreign institutional investors remained a major source of pressure. On September 30, FIIs sold Indian equities worth more than Rs 10,000 crore, taking their selling across two sessions to over Rs 20,000 crore.
Why are Indian stocks falling?
A key concern for investors is the rise in US bond yields. The US 10-year Treasury yield moved above 5.3 per cent, making fixed-income assets in the US more attractive and potentially reducing the appeal of emerging-market equities.
The rupee also weakened beyond Rs 96 against the US dollar on Thursday. For overseas investors, a weaker rupee can reduce dollar-denominated returns from Indian equities.
Oil prices are another concern, with supply disruptions linked to the conflict with Iran adding uncertainty around energy costs. Higher crude prices are particularly significant for India because of its dependence on oil imports.
India VIX, the market's volatility gauge, also climbed as the selloff intensified.
What does the market fall mean for investors?
Eshaan Lazarus, Founder & CEO, 021 Trade, said the headline indices do not fully reflect the performance of stocks held by many retail investors, particularly those with exposure to mid- and small-cap companies.
"The Nifty 50 tells only part of the story. Nifty MIDSMALL400 index is just 5 to 6 per cent off its high. Nifty is not the right benchmark as most investors prefer mid and small cap stocks. SIP money has steadily tilted away from large caps toward mid and small caps over five years," Lazarus told NDTV.
Lazarus also pointed to changing investor expectations after years of strong market returns.
"Part of the disappointment, in my view, also comes from the expectations built during strong markets. NSE's registered investor base more than tripled between the end of 2020 and 2025, showing how many investors are relatively new to the market. Those investors who have only experienced annual returns of 20 to 30 percent will find single-digit returns to be disappointing."
Global uncertainty adds to pressure
Lazarus said Indian equities have also underperformed several emerging markets.
"By the end of September, the MSCI Emerging Markets Index had increased by more than 20 per cent on a dollar basis, whereas the Nifty 50 had dropped by about 13 per cent on a rupee basis, and the rupee had weakened from approximately 90 to above 96 against the dollar this year."
He added, "In the long term, stocks are still worth looking at. The choice between selling or investing should not be based entirely on whether the market is down today."