Why did stock market crash today? Sensex tumbles 1,124 points, Nifty below 22,800; 6 factors behind Rs 8 lakh crore rout

The Indian stock market ended sharply lower on Monday, with the Sensex and Nifty falling up to 1.6% each as the escalating Iran-US conflict pushed oil prices and bond yields higher, spooking investors.

The Sensex plunged 1,124 points to end below 72,800, while the Nifty 50 dropped more than 360 points to end the session near 22,800. The sell-off wiped out nearly Rs 8 lakh crore from the total market capitalisation of BSE-listed companies, bringing it down to around Rs 474 lakh crore.

Out of 30 Sensex constituents, 29 closed in the red with L&T and Power Grid shares dropping nearly 3% each to lead losses on the benchmark index. Adani Ports, HDFC Bank, Hindustan Unilever, Reliance Industries and SBI shares fell over 2% each. Bucking the trend, Infosys was the only stock on Sensex that closed in the green, managing to hold on to marginal gains.


The selloff was broad-based, with Nifty Smallcap 100 and Nifty Midcap 100 indices falling nearly 2% each. India VIX, which measures volatility in the market, rallied around 12% to near 14.

All sectoral indices closed in the red, with Nifty PSU Bank crashing more than 3% and Nifty Realty tumbling over 2%. Nifty Auto, Nifty Financial Services, Nifty FMCG, Nifty Metal, Nifty Private Bank and Nifty Realty dropped 1-2% each. The overall market breadth turned strongly negative, with NSE seeing 2,716 declines against 869 advances, while 91 stocks remained unchanged.

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Here are the key factors pushing the market down today.

1) Iran-US conflict escalates

US President Donald Trump rejected Iran's proposal for a seven-day ceasefire and reopening of the Strait of Hormuz. Speaking to reporters on Saturday, Trump forcefully stated, "I reject this agreement. They want an agreement to be made under which the Strait of Hormuz is immediately opened, because they are severely failing.”

Meanwhile, Iranian President Masoud Pezeshkian said that Iran will remain resolute and not retreat in the face of the United States and Israel. “We stand firm with strength, we are at the service of our people, we will stand until our last breath, and we promise that as long as we have life in our bodies, we will be honest servants to the people; you have put us to shame, I do not consider myself worthy of your presence, I am your servant,” he said.

With the Iranians holding firm in the face of Trump's threat of annihilation and his rejection of the peace deal may have spooked investors who will keenly watch developments in the oil-rich Middle East.

2) Oil prices jump

As a result of the latest developments in the Middle East, oil prices jumped 2% to near $107 per barrel as market priced in further disruption in oil shipments. Brent crude futures were trading near $107 per barrel while WTI Crude futures traded close to $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.

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3) Bond yields soar

Bond yields continued to soar to fresh multi-year highs, further putting pressure on equity markets. The yield on benchmark US 10-year Treasury notes surged further above 5.2%, highest since 2004. The 30-year US bond yield jumped above 5.5% while that on the two-year notes, which moves in tandem with Fed rate hike expectations, rose above 4.9%.

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 breaches 96-mark

The rupee dropped 28 paise to close at 96.03 against US dollar in early trade. Forex traders were fearing the Indian currency crossing the key psychological mark of 96 against the American greenback, which it breached by the end of the session as it continues to face headwinds from higher oil prices, rising US Treasury yields and a firmer dollar.“Volatility in crude and gold, along with a rise in the dollar, limited the rupee’s ability to sustain gains. Going ahead, currency movement is likely to remain range-bound amid global commodity and dollar volatility. Rupee range can be seen between 95.50-96.50,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

5) FII outflows

Foreign investors remained sellers of Indian equities on Friday, net selling shares worth Rs 3,694 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. He noted that this trend has sustained and the total equity outflows through exchanges have touched Rs 25,682 crores this month so far.

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6) Weak global cues

Dalal Street is accompanying most of its Asian peers today which traded in the red amid the soaring oil prices. South Korea’s Kospi dropped nearly 3% while China’s Shanghai Composite fell around 2%. Japan’s Nikkei recorded marginal losses.

What lies ahead for Dalal Street?

Bears remained firmly in control as the market breached a key psychological support level, reflecting growing investor caution amid deteriorating global macro conditions, said Vinod Nair, Head of Research, Geojit Investments. He noted that the US' rejection of the ceasefire proposal has heightened concerns that tensions in West Asia could persist for longer than anticipated, reducing the likelihood of a near-term diplomatic resolution and increasing the risk of prolonged supply-side disruptions and higher commodity prices.

While rising US bond yields are narrowing the India-US yield spread, potentially leading to foreign fund outflows and keeping market sentiment cautious, selling pressure remained broad-based across sectors as investors reassessed risk amid growing expectations of another Fed rate hike, Nair said. In addition, market participants are likely to remain cautious ahead of the upcoming RBI policy decision, with global liquidity conditions, bond yield movements, oil prices, and policy signals expected to drive sentiment in the near term, the analyst further said.

Technical view on Nifty

Bears continued to strengthen as the selling pressure intensified, dragging Nifty decisively below the 23,000 mark, said Rupak De, Senior Technical Analyst at LKP Securities. He noted that the index extended its decline below the recent swing low, reinforcing the prevailing bearish structure. The RSI appears to be re-entering the oversold zone, indicating a rise in downside momentum, he said.

“Sentiment remains extremely weak, with rising US bond yields and crude oil prices adding to the negative bias. On the downside, immediate support is placed at 22,650–22,700, below which further correction could extend in the short term. On the higher end, 23,000 is likely to act as a strong resistance and may prove difficult to reclaim,” the analyst said while explaining the technical charts for the benchmark index.




Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.