&imwidth=800&imheight=600&format=webp&quality=medium "Indian stock market crashes, 7.4 lakh crore wiped out: What is driving the fall?")
The Indian stock market crashed severely on September 28, dragging both BSE and NSE to a six-month low. The BSE Sensex fell by 1,124.02 points, 1.52%, to close at 72,771.72, while NSE Nifty 50 crashed 360.25 points, 1.56%, closing at 22,780.25, wiping out roughly ₹7.4 lakh crore in market cap in a single day.
"Brent crude at $106 and the US 10-year yield at 5.2 per cent are strong headwinds that are weighing on markets. FPIs, after turning buyers in July and August, have again turned sellers in September. This scenario will keep the market under pressure in the near term," said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Investments.
Markets underperforming for seven straight weeks
The indices had already fallen for seven straight weeks, losing nearly 6%, now kicking off their eighth week with a crash on Monday, one of their longest such streaks on record. Out of 30 Sensex stocks, 29 closed lower. L&T and Power Grid were among the major losers, while Adani Ports, HDFC Bank, Hindustan Unilever, Reliance Industries and SBI also declined more than 2%. Almost all of the top 10 Nifty 50 heavyweight stocks fell; out of the 50-stock pack, only 3 stocks managed to finish in the green: Infosys, Dr Reddy's Laboratories, and HDFC Life.
If the market fails to recover by the end of this current week, it will officially mark an 8-week losing streak. According to historical data from Reuters, the longest consecutive weekly losing streak for the Nifty 50 over the last 25 years was nine weeks, recorded back in 2001, during a toxic combination of the Ketan Parekh securities scam, the global Dot-com bubble burst, and the global shock of the September 11 terrorist attacks at the World Trade Centre.
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What is happening in Dalal Street?
The sell-off highlights how India's strong domestic growth story cannot insulate its financial markets from global shocks. External shockwaves are overpowering domestic strength. Today's crash, according to experts, has global triggers, but India is also falling harder because of its own weak spots.
Trump rejected Iran's proposal on the Strait of Hormuz, pushing Brent Crude futures over $107 per barrel; US Treasury 10-year yields are at multiyear highs over 5.2%. Higher US bond yields can make dollar-denominated assets more attractive relative to emerging-market equities, pulling money out of emerging markets. Foreign investors sold ₹3,696 crore on Friday and about ₹18,500 crore through September 25.
At the same time, it is also increasing pressure on the rupee; dropping 28 paise to a record closing low of 96.03 against the US Dollar. It tested an intraday low of 96.14; state-run banks reportedly sold US dollars on behalf of the RBI throughout the trading session.
Prolonged energy shocks will inevitably trigger higher domestic inflation and force the RBI to tighten policy and hike interest rates at the October MPC meeting. Both FPI and a weakening rupee are collectively bringing down one another, accelerating the market crash. India's energy bill, which is largely dependent on imports, will increase and ultimately push more and more foreign investors out.
