Sensex Crashes 1000 Points: 5 Factors Driving the Selloff

A Multi-Day Selloff Grips Indian Markets

Indian equities plunged for a third consecutive session on Wednesday, deepening a market correction that has rattled investors. The selloff erased approximately Rs 6 lakh crore in investor wealth in a single day, as a combination of adverse global cues, persistent foreign fund outflows, and a mixed domestic earnings season soured sentiment. The BSE Sensex tumbled more than 1,000 points during intraday trading, while the Nifty 50 breached the critical 25,000 mark for the first time since October 2025, signaling broad-based weakness.

The decline has been sharp and sustained. Over the last six trading sessions, the benchmark indices have been under relentless selling pressure, wiping out nearly Rs 18 lakh crore in market capitalization. The Sensex has fallen over 2,700 points in this period, confirming that the correction is not sector-specific but a wider risk-off event.

Global Headwinds and Geopolitical Jitters

A significant driver of the current market weakness stems from escalating global uncertainty. Renewed trade war fears resurfaced after U.S. President Donald Trump threatened to acquire Greenland and impose fresh tariffs on the European Union. This rhetoric triggered a sharp selloff on Wall Street, with the S&P 500 falling over 2% and the Nasdaq Composite plunging 2.4% overnight. The negative sentiment quickly spread to Asian markets, pushing investors towards safe-haven assets.

Adding to the anxiety is the unresolved U.S.-India trade relationship. The bilateral trade agreement remains in flux, and threats of higher tariffs on Indian goods over purchases of Russian crude have kept investors on edge. Markets are also cautiously awaiting a U.S. Supreme Court ruling on the legality of Trump-era tariffs, a decision that could have significant implications for global trade. Furthermore, rising geopolitical tensions in Iran and Venezuela, coupled with a spike in Japanese government bond yields, have intensified caution among global traders.

Relentless Selling by Foreign Investors

The exodus of foreign institutional investors (FIIs) has been a primary catalyst for the market's decline. FIIs extended their net selling streak to an eleventh straight session, offloading equities worth nearly Rs 2,938 crore on Tuesday alone. This trend of consistent outflows has been a dominant theme for months, with foreign investors selling over Rs 1.70 lakh crore worth of equities since July.

While domestic institutional investors (DIIs) have acted as a counterbalance, their buying has not been sufficient to absorb the intense selling pressure from foreign funds. On Tuesday, DIIs were net buyers of shares worth about Rs 3,666 crore, but the persistent foreign outflows remained the overriding force driving the indices lower. This sustained withdrawal of foreign capital has sapped market confidence and amplified declines.

Domestic Pressures: A Weak Rupee and Patchy Earnings

On the domestic front, a weakening currency has added another layer of concern. The Indian rupee slid to an all-time low, weakening past 91 per U.S. dollar. A depreciating rupee raises the risk of imported inflation, increases costs for Indian companies, and makes Indian assets less attractive to foreign investors, potentially fueling further outflows. The currency has declined approximately 1.5% this month, extending a nearly 5% fall from 2025.

Simultaneously, the ongoing corporate earnings season has failed to provide a strong positive trigger. Disappointing results from market heavyweights such as Reliance Industries Ltd. and ICICI Bank have weighed on sentiment. Even companies reporting higher profits, like Persistent Systems, faced selling pressure as brokerages flagged rich valuations and limited upside, reinforcing concerns that market valuations may have run ahead of fundamentals.

Key Data from the Market Decline

Technical Breakdown Signals Further Weakness

Technical analysts have pointed to the breach of crucial support levels as a sign of further potential downside. According to Shrikant Chouhan, Head of Equity Research at Kotak Securities, the market broke through the 25,500/83,000 support zone, which triggered intensified selling. The formation of a long bearish candle on daily charts suggests that weak sentiment is likely to persist as long as the Nifty trades below 25,500.

Anand James, Chief Market Strategist at Geojit Investments, noted that the favored view expects an extension of the downtrend, with potential targets at 24,715–24,580. While oversold conditions could lead to intermittent recovery attempts, analysts advise caution until the market decisively moves above key resistance levels.

Conclusion

The sharp correction in the Indian stock market is the result of a confluence of powerful negative factors. A fragile global environment, marked by trade and geopolitical tensions, has been compounded by relentless FII selling and domestic concerns like a weakening rupee and an uneven earnings season. With key technical supports broken, the market sentiment remains bearish. Investors are now closely watching for cues from the upcoming U.S. Supreme Court ruling on tariffs and the U.S. Federal Reserve's policy decisions to gauge the market's near-term direction.