Indian equity markets continued their brutal selloff with the BSE Sensex tumbling 1,456 points, or 1.9%, to close at 74,559.24, falling below the 75,000 mark for the first time in recent sessions. In just two trading sessions this week, the Sensex has lost nearly 2,800 points or over 3%, while in four sessions since May 7, the total loss has been almost 3,400 points or 4.4%. As per The Times of India, investors' wealth, measured by BSE's market capitalisation, has now decreased by ₹19 lakh crore from the recent high of ₹475 lakh crore on Thursday, May 7, to approximately ₹456 lakh crore. The current decline appears to be driven by a broader confidence shock in the market, with investors increasingly interpreting recent policy messaging as an indication that policymakers may be preparing for a tougher macroeconomic environment ahead.
India's global market capitalization share has fallen below 3% due to a sustained bearish trend and significant foreign portfolio investor (FPI) outflows, according to The Economic Times. The benchmark Indian equity indices have lost nearly 13% since the beginning of 2026 amid unabated selling by foreign portfolio investors, affecting the country's market share that had reached over 4.6% in 2024. Despite this weakness, India retains its fifth position globally with a market cap of $4.9 trillion as of May 12, though Taiwan and South Korea are rapidly gaining ground, helped by a rally in semiconductor company stocks. A year ago, Taiwan's market cap was half whereas South Korea's market cap was one-third compared with that of India. The price-earnings (P/E) multiple of Indian benchmarks at around 20.6 remains above some of the equity indices in the world, with major European indices trading at P/Es between 15 and 19, while American indices trade at higher P/Es between 22 and 38.
The sectoral carnage was led by IT and Realty sectors, with the Nifty IT Index shedding over 3% as concerns grew around AI-driven pricing pressure and potential disruption following recent enterprise adoption initiatives by OpenAI, according to The Economic Times. The Nifty IT sectoral index fell 3.7% to its lowest level since May 2023 after AI giant OpenAI said on Monday that it is setting up a company to help organisations deploy AI systems. The Nifty IT is down over 25% so far in 2026, with big names like TCS, Wipro, and Infosys losing 3-4% on Tuesday, dragging down BSE's Sensex by 1.9%. The sector has already been hit by concerns of 'AI-deflation' to its order books and loss of future business due to Anthropic's success with its Claude suite of models. From the Sensex pack, Tech Mahindra, Adani Ports, HCL Tech, Tata Consultancy Services, Titan and Bharat Electronics were among the major laggards, while State Bank of India was the only winner. Sectorally, realty dropped 4.22%, Focused IT (3.61%), services (3.51%), IT (3.37%), consumer durables (3.35%) and industrials (3%).
Foreign portfolio investors (FPIs) have intensified selling in Indian equities after reporting a record outflow of $18.9 billion (₹1.7 lakh crore) in 2025, according to The Economic Times. On a year-to-date basis, they have sold equities worth $23.1 billion (₹2.2 lakh crore) in 2026 and around 10% of that or $2.5 billion occurred in the first seven sessions. Crude oil prices rose past $105 a barrel, exerting pressure on the rupee, after US President Donald Trump on Monday called Iran's response to the US's latest offer "garbage", as reported by The Indian Express. The rupee continued its downward spiral, hitting a fresh low of 95.75 against the US dollar before closing at 95.63 — the lowest it has ever ended a session. Brent crude surged 3% higher to $107.40 per barrel as US-Iran talks stalled, keeping foreign institutional investors firmly in sell mode. The currency's collapse is compounding fears of a widening import bill and rising inflation.
Market breadth reflected the severe selling pressure, with 3,412 stocks declining while 869 advanced and 129 remained unchanged on the BSE on Tuesday. In the broader market, the BSE MidCap Select index tanked 2.92% and the SmallCap Select index declined by 2.73%, badly underperforming the benchmarks. The damage ran deeper in the broader market, with the Nifty Midcap 100 falling 2.5% and the Nifty Smallcap 100 plummeting 3.2%, as per The Times of India. The Nifty 50 ended 1.8% lower at 23,379.55, while the India VIX, a measure of market volatility, gained nearly 4% Tuesday. Analysts warn that volatility may persist unless global tensions ease and inflation concerns stabilise, with the selloff accelerating and relief not coming easily. The pressure on Indian equities is now being amplified by a macro "triple hit"—crude oil prices hovering near $105–107 per barrel, the rupee slipping to a fresh record low against the US dollar, and continued aggressive FII outflows.
