Why is market falling today? Sensex slumps 700 points, Nifty below 22,600. 8 key factors rattling D-Street

The Indian stock market continued to slip further into the red on Tuesday, a day after Sensex and Nifty crashed over 1.5% as elevated oil prices, surging bond yields and other headwinds continued to spook investors.

Sensex dropped around nearly 700 points to trade below 72,633, while Nifty 50 lost around 166 points to trade below 22,650 on Tuesday morning. The plunge wiped off nearly Rs 4 lakh crore from the total market capitalisation of all stocks listed on BSE in just minutes after opening, dragging it down to Rs 474 lakh crore.

Bajaj Finance shares dropped around 2% to lead losses on Sensex, while HDFC Bank, Kotak Mahindra Bank, Infosys, HCL Tech, Axis Bank, Asian Paints and Reliance Industries shares fell more than 1% each. Bucking the trend, Sun Pharma, Adani Ports and IndiGo traded in the green with marginal gains.


The bearish sentiment was broad-based, with Nifty Midcap 100 and Nifty Smallcap 100 indices falling around 0.8% each. India VIX, which measures volatility in the market, jumped 5% to 14.37.

Read More: Stock market today live updates

Among the sectors, Nifty Financial Services, Nifty Private Bank, Nifty Oil & Gas and a few other indices dropped more than 1% each. The overall market breadth continued to remain bearish, with NSE seeing 2,258 declines against 705 advances, while 88 stocks remained unchanged.

Stock Market Down Reasons:

Here are key factors behind today's stock market selloff:

1) Fading hopes for Iran-US peace deal

US President Donald Trump has rejected reports that he had offered Iran sanctions relief and the release of frozen Iranian funds in exchange for concessions on its nuclear programme. “This is untrue. I offered them NOTHING,” Trump said in a post on Truth Social, responding to an Axios report that cited US officials as saying he was willing to offer sanctions relief and release frozen Iranian funds in return for “concrete” steps from Tehran on the nuclear issue. US and Iranian officials meanwhile held separate talks with mediators on Monday as efforts resumed to bring an end to the seven-month war, officials from both countries said.

The Middle East war began in late February with US and Israeli attacks on Iran, killing thousands of people over seven months and shocking global markets as crucial waterways for oil remained choked. The US and Iran have twice previously agreed to ceasefires in mediated peace talks, but those fragile agreements were soon violated, and the latest efforts are failing to cheer up market.

2) Oil prices soar

As developments in the oil-rich Middle East continue to keep investors on the edge, oil prices continued to rally and rattle global markets. Brent crude futures jumped above $107 per barrel, while WTI Crude futures rose above $94 per barrel.

JPMorgan said it had lost visibility on the direction of oil prices and, for the first time since the Iran war began in February, no longer had a clear baseline scenario for the market. The bank said escalating tensions were adding to concerns over an already worsening supply shock.

"We simply don't know how to model the endgame," JPMorgan analysts said, pointing to the uncertainty over how the conflict could evolve. When the conflict began, the bank had assumed there were economic thresholds that the US administration would not cross. Six months into the war, JPMorgan said, many of those thresholds have been crossed, while there remains no clear exit strategy.

Also read: RBI Rate Hike: Will RBI announce steep rate hikes? Nomura sees up to 50 bps increase by Dec, dismisses 125 bps hike fears

3) Bond yields surge

Bond yields extended its trend to hitting fresh multi-year highs every day, further putting pressure on equity markets. The yield on benchmark US 10-year Treasury notes surged further above 5.25%. The 30-year US bond yield jumped close to 5.7% while that on the two-year notes, which moves in tandem with Fed rate hike expectations, rose above 4.95%.

Soaring bond yields typically make debt markets more attractive to investors, which in turn puts pressure on the riskier equity markets. Bond yields move inversely to bond prices, so the soaring yields reflect a sharp selloff in bonds.

4) Rupee tumbles to two-month low

Rupee tumbled past the 96 per dollar to touch a two-month low as oil prices continued to surge, intensifying investor worries about the impact on the net energy-importing economy. The rupee declined to 96.1450 against the American greenback.

Going ahead, the rupee will take cues from global commodity prices, dollar movement and foreign fund flows, keeping the currency under pressure, said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities.

Also read: Rupee hits two-month low, breaches 96/USD mark as oil worries deepen

5) FII outflows intensify

Foreign investors continued to remain sellers of Indian equities on Monday, net selling shares worth more than Rs 5,353 crore, according to provisional data on NSE. The trend of FPI flows turning negative after positive inflows in July and August was evident early this month, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

The analyst noted that this trend has sustained and the total equity outflows through exchanges have touched Rs 25,682 crores this month till last week. Notably, FIIs have net sold Indian equities in 15 out of 19 session this month so far.

6) Weak global cues

Dalal Street is accompanying its global peers in the market downturn today. Wall Street closed in the deep red yesterday, with the tech heavy Nasdaq falling more than 0.9% and S&P 500 dropping around 0.8%.

In Asia, Japan’s Nikkei dropped over 1%. Hong Kong’s Hang Seng, South Korea’s Kospi and several other markets fell nearly 1% each.

7) Nifty monthly expiry

Today’s session also marks the monthly expiry for Nifty’s F&O contracts. Typically, markets see heightened volatility on monthly expiry days. The continuous downturn in Nifty meanwhile has turned the technical charts weak for the benchmark index.

Anand James, Chief Market Strategist at Geojit Investments, noted that momentum indicators are entering the oversold zone, a near-term pullback towards 23020 cannot be ruled out. But the broader trend remains weak unless 23,150 is reclaimed. While a break below 22,600 appears less likely today, any such move could accelerate the decline towards the 21,800 region.

Also read: Sensex crossed 85K for first time 2 years ago, now down 10K points from milestone. What can trigger the next bull run?

8) RBI rate hike expectations

The RBI is set to hold its Monetary Policy Committee (MPC) meeting next week from October 5 to October 7, and the market is pricing in steep rate hikes amid an overall global policy tightening cycle. This comes after the US Federal Reserve increased rates earlier this month. The Fed's latest rate hike marked its first since 2023, as soaring oil prices and other uncertainties kept inflation well above its long-term target and ended a prolonged period of policy stability.

Nomura said market is pricing in close to 125 basis points of rate hikes over the next one year, but it sees this cycle is fundamentally different and expects policy fine-tuning instead, with the international brokerage seeing a higher chance of a cumulative 50 bps rate hike.


What lies ahead for Dalal Street?

With Brent crude above $107 and the US 10-year at 5.23%, the global macro construct continues to be unfavourable for equity markets, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He noted that the emerging macro scenario in the US appears to be one of high growth and high inflation. The massive AI spending is driving growth and better-than-expected growth will keep inflation elevated, warranting one more rate hike by the Fed. This, in turn, is pushing US bond yields higher, the analyst explained.

“Since higher crude prices have not been passed on to consumers, the fiscal strain on India will be higher in FY27. Therefore, if crude prices remain elevated, the fiscal strain can impact India’s GDP growth and corporate earnings growth for FY27. This concern, too, is weighing on the market. The attractive valuations of large-cap growth stocks present buying opportunities for long-term investors,” he said.

(With inputs from agencies)
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