Dalal Street saw its worst day in more than 20 months on Thursday, as equity benchmarks plunged over 3% in a broad sell-off led by financial sector stocks. Sentiment darkened particularly in private banks, both on stock-specific concerns and a wider risk-off mood.
Among the Nifty's top five losers, three were financials - Shriram Finance (-7.0%), HDFC Bank (-5.1%) and Bajaj Finance (-4.9%). At the centre of the selloff was HDFC Bank, whose shares closed 5% lower after falling 9% to hit a 52-week intra-day low. In a shock leadership change, Atanu Chakraborty stepped down as HDFC Bank chairman on Wednesday, with group veteran Keki Mistry taking over as interim chairman for three months.
The Nifty ended 3.3% down at 23,002.15, its worst single-day decline since its 5.9% plunge on 4 June, 2024. The Sensex also closed 3.3% lower to 74,207.24, its worst show in the same period. The broader market weakened as well, with the Nifty Midcap 100 down 3.2% and the Smallcap 250 falling 2.6%. The selloff, amid a jittery global backdrop, wiped out ₹11.62 trillion in investor wealth from BSE-listed companies. Volatility surged, with India Vix rising nearly 22% on Thursday.
Nagaraj Shetti, senior technical research analyst at HDFC Securities, said the overall chart pattern of the Nifty remains weak, with Wednesday’s high of 23,862 now seen as a new lower top. “As per this bearish pattern, one may expect further weakness in Nifty in the near term.” He added that a slide below 22,900 could open the next downside target of 22,500 in the near term, with immediate resistance at 23,350.
According to BSE provisional data, FIIs were net sellers of ₹7,558 crore, while DIIs bought shares worth ₹3,864 crore.
The escalation in West Asia, marked by strikes on critical energy assets across countries, has triggered an oil price shock, raising the risk of a prolonged period of elevated energy prices, said Nirav Karkera, head of research and fund manager of PMS division at Fisdom. The US Federal Open Market Committee has also flagged this as an upside risk to inflation, he said.
“The combination of a deeper conflict phase and persistently higher crude prices is weighing on global markets, with a pronounced shift towards risk-off sentiment.”
Geopolitical tensions intensified after Iran stepped up retaliation following the strike on South Pars, targeting key Gulf nations including Qatar, Saudi Arabia and the United Arab Emirates (UAE). The flare-up dented risk appetite. Adding to the unease, US President Donald Trump warned Iran against further retaliation after the attack on Qatar’s Ras Laffan energy complex, sending fresh ripples across global markets.
Global cues remained negative. The weakness in US equities spilled across to Asia, with the Nikkei dropping around 4%, the Hang Seng declining 2%, the Kospi slipping nearly 3%, and the Shanghai Composite down 1.4%.
Gaurav Dua, chief investment officer of Standard Chartered Securities (India) said the selling pressure would ease if energy prices soften or the global environment improves.
India Inc.’s earnings recovery will take longer than expected as higher energy prices amid the West Asia conflict could squeeze margins, Dua said. “The consensus about a month back was building around 14-15% kind of (earnings) growth, which might come to low double-digits because of these changes in the input cost,” he said.
For a year and a half, India Inc. has been in an earnings downgrade cycle that was expected to bottom out, but the rising energy prices could prolong the recovery, he said. “Despite this, we believe that the worst of the cycle is now behind us.”
Risks are rising as the US labour market weakens, showing recession-like trends, while the roughly $2 trillion US private credit market is facing liquidity pressures. This could weigh not only on global tech valuations but also on AI capex, similar to the dot-com era, according to a 17 March report by Nuvama Institutional Equities.
“Fed’s quantitative easing and oil supply resuming are key to normalcy. Else, brace for volatility,” the report cautioned.
So, a global risk-off could hurt Indian equities, Nuvama believes. After all, about 35% of the BSE 500 faces micro challenges (IT, FMCG, etc.), while roughly 40% comprises expensive cyclicals (autos, industrials, etc.) that are vulnerable to macro risks, the brokerage noted.
Currency weakness added to the pressure, with the rupee falling to a new low of 92.6 on Wednesday against the dollar. This has led to higher foreign outflows, creating a cycle in which a weaker currency drives more selling, adding to the downside risk. The rupee market was shut on Thursday on account of Gudi Padwa, while oil prices continued to trade above $100 per barrel.
Sentiment was further hit when the US Federal Reserve held rates steady and signalled just one rate cut this year as it assessed risks from rising oil prices and the US-Israel conflict with Iran. Chair Jerome Powell flagged uncertainty around the oil shock and noted that progress on inflation has been limited, warning that persistent tariff-led price pressures and conflict-driven energy costs may not be transient. He added that the Fed would need to see core inflation ease as tariff effects pass through the economy.
In effect, higher US inflation could keep interest rates elevated, strengthening the dollar and triggering foreign outflows from India, pressuring the rupee and equities. It also raises global borrowing costs and risk aversion, often leading to volatility in Indian markets and tighter liquidity conditions.
The dot plot showed no change, with one cut each getting signalled in 2026 and 2027, said Ionic Wealth report by Angel One. The dot plot is a quarterly chart where each dot represents an official's prediction of where interest rates will be over the next few years.
“The pause restricts weaker dollar and therefore hurts the EM trade, which will see perils of both higher energy prices and a weaker currency. RBI is also likely to face a similar dilemma and is now unlikely to cut in April,” the report pointed out.
Kotak Institutional Equities sees the correction as an opportunity to add ‘better’ stocks, remove ‘narrative’ stocks, and reduce positions in expensive cement and consumer stocks. “A churn in portfolios may be the best option, given the circumstances.”
Even in the commodities space, precious metals failed to live up to their safe-haven tag, offering little support amid the turbulence.
Ponmudi R., chief executive officer of Enrich Money, a Sebi-registered online trading and wealth tech firm, said, “Interestingly, safe-haven assets did not behave traditionally. Gold declined by over 3.4% and silver by nearly 6%, indicating profit booking or possible liquidity-driven unwinding rather than a pure flight to safety”.
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