Indian markets witnessed another brutal session on Thursday, with BSE SENSEX tumbling 1,045.46 points or 1.44% to close at 71,593.24 - the lowest closing since February 2024, while NSE NIFTY50 declined 371.25 points or 1.64% to close at 22,231.80 - the lowest closing since April 2025. The sharp sell-off resulted in a market capitalisation loss of nearly ₹10 lakh crore, bringing the total sell-off to an eighth consecutive weekly decline and marking the worst losing streak in 25 years. As per The Economic Times, of the 4,654 shares traded on the BSE, 3,545 declined while 910 advanced, highlighting the broad-based nature of the market decline. The volatility index, or India VIX, shot up by 10.26% in response to the uncertainty, reflecting heightened market fear. According to BSE data, the market capitalisation of companies listed on the exchange stood at ₹4,71,01,915 crore at the end of Wednesday's session, showing the sharp erosion in investor wealth.
The stark contrast between India's booming economy and crashing stock market has left investors puzzled. India's GDP has surpassed estimates, clocking a 7.8% growth, with the World Bank betting on an even stronger year than it previously expected. However, as per The Times of India, the economy is growing while the stock market seems to be struggling, creating a disconnect that market experts are struggling to explain. The fundamental difference lies in the nature of these indicators - GDP tells us what has already happened, while the stock market is busy pricing what comes next. Jyoti Prakash Gadia, Managing Director of Resurgent India Limited, explains that the current fall is more about short-term geopolitical uncertainty than any change in India's long-term growth outlook. The existence of high GDP growth means there is backstop support available, although its conversion into future healthy earnings growth is neither clear nor certain.
The market decline was triggered by the Reserve Bank of India's decision to hike repo rates by 25 basis points to 5.5% for the first time since February 2023. According to reports, the RBI shifted to a calibrated tightening stance following interest rate hikes by some central banks, including the US Federal Reserve. The decision came as annual inflation rate rose to 4.82% in August 2026, marking the highest level since December 2024 and rising above the RBI's 4% target for the third consecutive month. Brent crude oil prices climbed above $104 per barrel on Thursday, surging 4.1% due to renewed worries about the lingering West Asia conflict, further pressuring markets. Governor Sanjay Malhotra firmly put rate cuts "off the table" for the near future, with the Monetary Policy Committee officially shifting to "calibrated tightening" with a 4:2 vote. The RBI has also warned of external headwinds, including the erratic weather phenomenon marked by 'El Nino' which could keep inflation sticky for longer than expected. Alongside the rate action, the RBI revised its FY27 GDP growth forecast upward by 40 basis points to 7.1% and raised its inflation projection to 5.2%.
The NIFTY50 initially showed some resilience after the RBI's decision, touching a low of 22,588 minutes after the market opened but recovering after the central bank opted for a 25-basis-point hike, in line with market expectations, rather than a sharper 50-basis-point increase. However, selling pressure intensified later in the session as a falling rupee and elevated crude oil prices weighed on sentiment. Adani Enterprises fell 5.4%, while JSW Steel and ITC dropped 4.5% and 4% respectively, leading the decline among major stocks. The benchmark index climbed to an intraday high of 22,717.65 during mid-day trading, although it remained 0.26% below Tuesday's close. Broader markets also remained under pressure, with the Nifty Midcap 150 and Nifty Smallcap 250 dropping 2.4% each, reflecting widespread selling across market segments. Among sectoral indices, the Nifty Metal index was the worst performer of the day as investors pared exposure to metal counters, with metals bearing the steepest losses, shedding over 2.35%, while realty, auto, consumer durables, and IT also remained under pressure. PSU Banks and media were among the few outperformers, providing some support to the market. In the broader market segment, the Nifty MidCap 150 index slipped 0.63%, while the Nifty SmallCap 250 index bucked the trend and gained 0.30%.
The rupee also weakened in tandem with equities, with USDINR touching 96.85 during the session, logging its second weakest close and trailing most Asian peers. As per Dilip Parmar, Senior Research Analyst at HDFC Securities, "A rebound in crude oil prices and a wave of risk aversion added pressure, leaving dollar bulls firmly in control," who sees near-term resistance at 96.97 and support at 96.30. Brent crude climbed back above $104 per barrel, compounding the cautious sentiment, while continued foreign institutional outflows and elevated global bond yields added further headwinds. Foreign institutional investors have already remained heavy sellers, offloading equities worth ₹22,676 crore in October so far. Continued rupee weakness could add another headwind for domestic equities as investors assess the impact of tighter monetary policy, elevated oil prices and global bond yields. Jyoti Prakash Gadia from Resurgent India Limited notes that markets are reacting to higher global bond yield, elevated crude oil prices, uncertainty around the Strait of Hormuz, a weaker rupee and FII outflows, while strong GDP growth continues to reflect the underlying strength of the economy.
Commenting on NIFTY technical outlook, experts said that the Nifty fell below 22,700 and closed near the important 22,600 support level. "A sustained break below this level could reopen downside toward 22,400, while 22,800 is now the first recovery hurdle," market watchers stated. For the near term, 22,700 on the Nifty and 73,000 on the Sensex remain the key resistance levels, a sustained close above either would be the first signal that market sentiment is beginning to stabilise. Looking ahead, analysts broadly expect the tightening cycle to remain shallow. Kaustubh Gupta, CIO – Fixed Income at Aditya Birla Sun Life AMC, sees a shallow rate hike cycle of another 50bps over the next 6 months, citing the global macro backdrop. CareEdge Ratings' Chief Economist Rajani Sinha also pencilled in another 25–50 basis points of hikes, but noted that headline inflation is expected to moderate from Q4 FY27. Shweta Rajani from Anand Rathi Wealth Limited suggests that near-term volatility may continue until some of the geopolitical and crude oil concerns settle, but the current correction looks temporary. She notes that valuations across market caps have become reasonable, with no meaningful froth visible and the Nifty 50 itself showing negative froth of around 16%.
