Investors lose Rs 5 lakh crore as Sensex crashes over 900 points: What happened?

Indian equity markets came under intense selling pressure on Monday, with the Sensex plunging more than 900 points within the first hour of trading and the Nifty 50 falling below the 23,000 mark.

The sell-off came after both benchmark indices had already recorded their seventh consecutive weekly decline. Rising crude oil prices, higher US bond yields, continued foreign investor selling and broader geopolitical uncertainty added to the pressure.

By 10.15 am, the combined market capitalisation of BSE-listed companies had fallen by nearly Rs 4.9 lakh crore from the level at the open. The market decline was driven by several factors rather than a single trigger.

1. Crude oil prices remain a major concern

Brent crude has stayed above the USD 100-a-barrel level amid continuing tensions involving the US and Iran. Higher oil prices are a concern for India because of its dependence on imports.

"Expensive oil can push up India's import bill and inflation while putting pressure on the rupee. It can also squeeze the margins of companies that depend heavily on fuel and transportation. Markets have therefore been closely tracking every move in crude prices," Abhishek Bhilwaria, Partner at BhilwariaFinserv, told NDTV.

2. Rising US bond yields add pressure

US Treasury yields have also climbed sharply, making dollar-denominated fixed-income investments relatively more attractive compared with riskier emerging-market assets.

Investors are also watching inflation risks, particularly if higher oil prices keep pressure on prices and raise expectations that US interest rates could remain elevated for longer.

3. Foreign investors keep selling

Foreign investor outflows have remained a weak spot for Indian equities. Concerns around global yields, crude prices and geopolitical uncertainty have encouraged overseas investors to reduce exposure to Indian stocks.

"The continued foreign outflows have been one of the factors keeping sentiment weak even when domestic liquidity has provided some support," Bhilwaria said.

4. Banks and financial stocks fall

Banking and financial stocks were among the biggest losers in early trading. Since these companies carry significant weight in the benchmark indices, declines across major banking stocks can have a substantial impact on the Sensex and Nifty.

5. Global uncertainty weighs on sentiment

Geopolitical tensions involving the US and Iran have added to the risk-off mood in global markets. Higher oil prices and rising bond yields have compounded those concerns.

The Indian market was already coming off a weak week. The Sensex closed Friday at 73,895.74, while the Nifty ended at 23,140.50, with both indices recording their seventh straight weekly decline.