Sensex crashes over 700 points, snaps 7-day bull run. 5 factors behind the selloff in Indian stock market today

Snapping its seven-day winning streak, Indian stock market's frontline index, the Sensex, closed with a significant loss of over 700 points on Wednesday, March 26, on across-the-board selloff. Sensex closed with a loss of 729 points, or 0.93 per cent, at 77,288.50, while the Nifty 50 settled 182 points, or 0.77 per cent, lower at 23,486.85.

The BSE Smallcap index underperformed with a loss of 1.45 per cent, while the Midcap index closed 0.67 per cent lower.

The market selloff made investors poorer by about ₹4 lakh crore in a day as the overall market capitalisation of firms listed on the BSE dropped to nearly ₹411 lakh crore from ₹415 lakh crore in the previous session.

Among the sectoral indices, Nifty Bank declined 0.77 per cent, while PSU Bank and Private Bank dropped 1.19 per cent and 0.90 per cent, respectively.

Nifty Media (down 2.40 per cent) ended as the top loser among sectoral indices. Realty, Healthcare and Oil & Gas indices dropped over a per cent each.

What drove the Indian stock market down today?

Here are five key factors that experts believe were behind the selloff in the Indian stock market today:

1. Profit booking in key heavyweights

Experts pointed out that the Indian stock market witnessed a significant rebound in March after correcting 15 per cent from its peak. As uncertainty surrounding US President Donald Trump's tariff policies persists, investors are booking profits to pocket some gains.

Shares of HDFC Bank, Infosys, Reliance Industries, Axis Bank and ICICI Bank ended as the top drags on the Sensex index on Wednesday.

2. Trump tariff jitters

The market remains on edge as the April 2 deadline for Trump’s tariffs approaches. While Trump suggested on Monday that not all proposed tariffs would take effect on that date, uncertainty surrounding his trade policy continues to weigh on investor sentiment.

"The market experienced profit booking after the recent gains on the back of next week's US tariff announcements. The sectors with higher exposure to the US market, like pharma & IT, have witnessed some selling pressure," said Vinod Nair, Head of Research at Geojit Investments Limited.

3. Renewed fears of foreign capital outflow

Attractive valuations in Chinese stocks and improved outlook for earnings have fueled speculation that the 'buy China, sell India' trend could resurface, potentially leading to increased foreign capital outflows from the Indian market.

According to a Bloomberg report, “Morgan Stanley strategists raised their outlook for Chinese stocks for the second time in a little more than a month, citing upside for valuations amid an improving outlook for earnings.”

However, experts believe the China factor is not a big risk for the Indian stock market as the Chinese economy is struggling with structural issues.

4. Caution ahead of start of earnings season

Investors appear cautious ahead of the start of the Q4FY25 earnings season. While there are expectations of a stable quarter, a sharp negative surprise in key sectors such as financials and IT could significantly impact market sentiment.

“In Q3, India’s earnings growth was 10% below the long-term average of 15 per cent. For Q4, earnings growth is likely to be better due to drastic improvements in government spending. But the earnings base of Q4FY24 is on the higher side, which can limit the upside,” said Nair.

5. Volatility ahead of monthly expiry

The market is witnessing volatility ahead of the monthly expiry on Thursday. According to Anshul Jain, Head of Research at Lakshmishree Investment and Securities, as traders took bulk calls during the recent bull run, they are squaring off their position in bulks. This could be the reason behind selling at higher levels in the stock market.

Meanwhile, the NSE announced on Tuesday, 4 March, that all Nifty index weekly derivatives contracts will expire on Monday instead of Thursday with effect from April 4, after the beginning of the new fiscal (FY26).

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.