Indian equities witnessed a sharp correction on Wednesday as profit booking in heavyweight stocks, persistent foreign selling and geopolitical tensions weighed on investor sentiment.
The Sensex fell 1,342 points, or 1.72 percent, to close at 76,863.71, while the Nifty 50 dropped 395 points, or 1.63 percent, to settle at 23,866.85.
Broader markets were relatively resilient but still ended lower. The BSE 150 Midcap Index declined 1.13 percent and the BSE 250 Smallcap Index slipped 0.32 percent.
The total market capitalisation of BSE-listed companies fell to about ₹442 lakh-crore from ₹447 lakh-crore in the previous session, wiping out roughly ₹5 lakh-crore of investor wealth in a single day.
Several factors contributed to the sharp decline in benchmark indices:
Profit booking in banking and other large-cap stocks dragged the indices lower after the strong rally seen in the previous session.
Shares of major companies such as HDFC Bank, ICICI Bank, Axis Bank, Bajaj Finance, Bharti Airtel, Reliance Industries and Mahindra & Mahindra witnessed selling pressure.
Sectoral indices reflected the weakness:
Nifty Bank fell 2.13 percent
Nifty Financial Services declined 2.32 percent
Nifty Auto dropped 3.15 percent
Market participants also remained cautious due to persistent geopolitical tensions stemming from the ongoing conflict involving Iran, the US and Israel.
The rupee weakened further on Wednesday, adding to the negative sentiment in equity markets.
According to Bloomberg data, the rupee declined 24 paise to close at 92.04 against the dollar.
A weaker rupee tends to accelerate foreign capital outflows as currency depreciation erodes overseas investors’ returns. It can also raise inflation risks and potentially lead to higher interest rates.
Jateen Trivedi of LKP Securities said the rupee is likely to trade in the 91.25–92.60 range in the near term, with crude oil prices and the dollar index remaining key drivers.
Geopolitical risks remained elevated despite comments from US President Donald Trump earlier this week expressing hope that the conflict with Iran could end soon.
According to international reports, the US military destroyed 16 Iranian boats suspected of laying mines near the Strait of Hormuz.
Washington has warned Tehran of severe consequences if shipping through the Strait of Hormuz is disrupted. Nearly one-fifth of global oil supply passes through this key route.
The United Nations has also warned that any disruption in the strait could pose significant risks to global growth and inflation.
Foreign institutional investors (FIIs) continued to pull money out of Indian equities. In the first six trading sessions of March alone, FIIs sold shares worth more than ₹32,800 crore in the cash market.
Higher crude prices, a weaker rupee and the strengthening dollar have made Indian assets less attractive for overseas investors.
VK Vijayakumar of Geojit Investments said the familiar pattern of sustained FII selling being countered by strong domestic institutional investor (DII) buying has resurfaced.
According to him, with FIIs showing limited interest in India and inflows into domestic mutual funds remaining strong, this trend could persist in the near term.
Crude oil prices have cooled slightly from recent highs but remain volatile due to the ongoing West Asia conflict.
For India, which depends heavily on imported oil, sustained high crude prices could widen the current account deficit, weaken the rupee and hurt corporate profitability.
Media reports citing Moody’s suggest that a prolonged conflict in the Middle East could reduce India’s GDP growth by about 1 percentage point while pushing inflation and interest rates higher by 1.5 to 2 percentage points.