Why market crashed today? Sensex plunges 719 points, Nifty closes below 23,150; 7 factors behind Rs 7 lakh crore sell-off

Indian equity markets witnessed a sharp sell-off on Monday, with the Sensex and Nifty tumbling around 1% each as a steep decline in global markets, continued foreign institutional investor (FII) outflows and other headwinds weighed heavily on investor sentiment.

Sensex slumped over 719 points to close at 73,524, while Nifty 50 tumbled around 244 points to end the session at 23,123. The market rout wiped out nearly Rs 7 lakh crore from the combined market value of BSE-listed firms, reducing overall market capitalisation to less than Rs 455 lakh crore.

Zomato-parent Eternal shares were the top losers on the Sensex, plunging more than 3%. M&M, Tata Steel, Bajaj Finance, Trent, Bajaj Finserv, Reliance Industries, IndiGo, L&T and TCS shares followed, sinking more than 2% each. Bucking the trend, Power Grid, Bharti Airtel, Bharat Electronics and Tech Mahindra shares gained over 1% each.


The bearish sentiment was broad-based, with Nifty Midcap 100 and Nifty Smallcap 100 indices sinking more than 1% to 2%. This came as India VIX, which measures volatility in markets, surged more than 8% to 17.09. All sectoral indices on NSE except Nifty Healthcare closed in the red, with Nifty Realty and Nifty Metal crashing over 2% each. Around 2,543 stocks declined on NSE, while 760 advanced and 105 remained unchanged.

Here are the key factors behind today’s Dalal Street selloff:

1) Global markets crash

South Korea’s Kospi plunged 9% on Monday, leading to a 20-minute trading halt, as the massive sell-off in tech stocks raged on. The index is now down about 14% from the record high it soared to last week. Japan’s Nikkei, meanwhile, plunged around 4%, while Hong Kong’s Hang Seng and China’s Shanghai Composite fell 1% to 2%.

Wall Street sharply crashed on Friday, with the tech-heavy Nasdaq tumbling more than 4% to record its biggest single-day fall since April 2025, after a better-than-expected US jobs report raised worries about the Federal Reserve’s higher interest rates.

The Nasdaq Composite index sank around 4.2%, weighed down by a more than 6% crash in Nvidia's share price and a nearly 8% drop in Broadcom shares, whose relatively weak guidance on Wednesday spurred fears that AI demand may not grow as quickly as estimated. The Dow Jones Industrial Average fell 1.4%, while the S&P 500 dropped nearly 3%.

Also read: Why did Nasdaq plunge 4% to log worst day in over a year

2) Fed rate hike worries

A surprisingly strong US jobs report showed employers added 1,72,000 jobs in May - more than double the 80,000 that economists had expected. While a strong jobs market reflects well on the economy, it can also trigger inflation worries and concerns that the Federal Reserve, the American central bank, is less likely to reduce its rates anytime soon.

"We are talking about a strong economy," said Gary Schlossberg, market strategist at ⁠Wells Fargo ‌Investment Institute, as quoted by Reuters. "That just adds to inflation risk coming from the Gulf. It makes it difficult for the Fed to even think about rate cuts and might even increase the chances - although we're still not ⁠forecasting that yet - of a rate hike by the Fed before the end of the year against the backdrop of inflation,” he said.

A rate hike by the Federal Reserve often triggers worry that the Indian counterpart RBI may follow with a similar move. Additionally, a rate hike by the American central bank puts pressure on the rupee, along with impact on certain sectors including IT.

3) Persistent FII selling

Foreign Institutional Investors (FIIs) remain sellers for the sixth consecutive session in the Indian market on Friday, selling Indian equities worth more than Rs 8,776 crore, according to provisional data on NSE.

FII offloaded shares worth Rs 31,120 crore in the first week of June, Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, highlighted. Domestic Institutional Investors (DIIs), meanwhile were net buyers. “Investor sentiment remained subdued amid ongoing geopolitical tensions, which continued to support elevated crude oil prices. Heightened global uncertainty, coupled with prevailing macroeconomic challenges, resulted in cautious market participation. Going forward, institutional flows are expected to remain highly sensitive to developments in US–Iran relations and fluctuations in oil prices,” he said.

4) Rupee tumbles

The rupee recorded its sharpest single-day fall against the US dollar since May 11, falling 52 paise to close at 95.70 against the American greenback. This came after the Indian currency recorded sharp gains on Friday after the RBI maintained the repo rate at 5.25% and announced a series of measures to support foreign capital inflows and strengthen forex liquidity.

Today’s rupee depreciation came on the back of a strong dollar after a stronger-than-expected US jobs report.

5) Middle East tensions flare up

Tensions continue to rise in the Middle East. Israel’s military has launched military targets in western and central Iran, after Iran on Sunday fired several missiles at Israeli targets. This came even after US President Donald Trump insisted that an agreement to end ⁠the wider war ‌remains well within reach, and reportedly told Israeli Prime Minister Benjamin Netanyahu to refrain from further attacks.

Sounds of blasts were reportedly heard in Tehran, Tabriz and Isfahan, local media reported. This further weakens the already fragile ceasefire, and raises worries over further escalations.

6) Oil prices surge

As a result of rising hostilities in the Middle East, oil prices surged. Brent crude futures jumped more than 4% to near $97 per barrel, while WTI crude futures also gained more than 4% to near $95 per barrel.

This comes amid rising worries over the prolonged closure of the Strait of Hormuz, a narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman that handles over 20% of the world’s daily oil and gas shipments.

Also read: Crude oil jumps 3% as Israel attacks Lebanon in latest escalation. Where are prices headed?

7) Bond yields rise

As a result of the rising inflation worries and oil prices, US Treasury yields surged. The yield on benchmark US 10-year notes rose to 4.57% while the 30-year bond yield rose to 5.024%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, jumped to 4.191%. Falling bond yields typically make bonds less attractive to investors, which in turn can lead to some uptrend in markets.

What lies ahead?

The Nifty 50 closed Friday at 23,366.70, down 49.85 points or 0.21%, extending its consolidation phase as the index continued to struggle near the 23,500 mark amid persistent FII selling and lack of fresh domestic triggers, said Rajesh Palviya, Head of Research of Axis Direct, who highlighted that while the decline was modest, market sentiment remains cautious with participants closely monitoring global developments.

“Global cues have turned distinctly negative after Wall Street witnessed a sharp sell-off led by technology, semiconductor and AI-linked stocks. The stronger-than-expected U.S. jobs data has reignited concerns that the Federal Reserve could maintain a hawkish stance for longer, resulting in higher bond yields and renewed risk aversion across global equities,” he added.

From a technical perspective, the near-term bias remains cautious as long as the Nifty trades below the 23,500–23,550 resistance zone, according to the analyst. He sees that the immediate support is placed around 23,100, and a sustained breach below this level could trigger further weakness towards the 23,000–22,800 zone. However, despite the negative opening, any stability in global markets and easing in crude oil prices could help the index find support at lower levels, Palviya further said.

Also read: Support at 23,000–23,100 zone remains critical for Nifty Bulls

(With inputs from agencies)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)