Indian stock market declined sharply on today, with the Sensex dropping around 610 points and Nifty slipping below 26,000, driven primarily by persistent foreign institutional investor (FII) outflows, rupee depreciation, and broad sectoral selling pressure.
Key triggers behind the downturn
Foreign portfolio investors continued heavy selling, withdrawing significant funds from Indian equities amid global uncertainties like US tariff policies under President Donald Trump and elevated US bond yields, which diverted capital from emerging stocks market. This marked the third straight month of net FII outflows, with over Rs 11,820 crore pulled out in the recent week alone, exacerbating pressure after Rs 1.55 lakh crore exited year-to-date. Domestic institutional investors offered some support through net buying, but it failed to offset the foreign exodus.
The Indian rupee weakened further, hitting lows around 89.92-90.46 against the dollar due to strong US dollar demand from importers and corporates, alongside rising crude oil prices that inflated import costs. This currency slide not only eroded FII profits but also fueled inflation fears, prompting caution among investors already jittery from high market valuations and slowing earnings growth.
Sectoral bloodbath and stock losers
All sectoral indices traded in the red, with realty plunging nearly 4%, PSU stocks down 2%, and midcaps or smallcaps declining 1.7-2%. Heavyweights like IndiGo (Interglobe Aviation) crashed over 4-8% amid ongoing flight disruptions and DGCA scrutiny, while banking and financial names such as HDFC Bank, ICICI Bank, and Reliance Industries dragged the benchmarks lower. Defence stocks like BEL fell 5%, and others including Eternal, Bharat Dynamics, and Mazagon Dock saw sharp losses in the PSU space.
Profit booking after recent rallies compounded the fall, with investor sentiment hit by broader concerns over U.S. credit rating risks, Moody’s warnings, and delays in India-U.S. trade pacts. Market capitalization eroded by billions, reflecting risk aversion as advance-decline ratios heavily favored decliners (886 advances vs. 2,918 declines mid-session).
Rupee depreciation raised import bills for oil and essentials, potentially stoking inflation and challenging RBI’s policy easing path. Combined with FII sales totaling Rs 6,584 crore in early December—following November’s Rs 11,592 crore outflow, this created a vicious cycle of volatility, contrasting October’s modest inflows. Global cues remained mixed, with Asian markets flat and caution ahead of U.S. Fed decisions capping any rebound hopes.
Investors lost over Rs 9 lakh crore in market value recently, underscoring fragility in high-valuation pockets like IT, financials, and exporters. While DIIs absorbed some selling (Rs 4,189 crore net buys recently), sustained FII pressure signals deeper risks unless rupee stabilizes and trade tensions ease. Markets closed with Sensex at around 85,244 (down 0.55%) and Nifty at 26,010 (down 0.67%), hinting at prolonged consolidation.