Sensex selloff: why Indian markets are under pressure

On Monday, Indian markets saw a sharp selloff. The BSE Sensex ended the day down 1,124 points or 1.52 per cent. The weakness was broadbased, with the PSU bank, FMCG, utilities, auto and financial services indices ending the day in the red. Investors have been feeling the pain for some time now. Since the beginning of this year, the Sensex has fallen by almost 15 per cent.

This souring of sentiment can be traced to several factors. The conflict in West Asia and the consequent high energy prices weigh heavy. More recently, oil prices spiked following US President Donald Trump’s rejection of a proposal from Iran to reopen the Strait of Hormuz. Alongside, rising bond yields in advanced economies — the 10-year US bond yield is currently at 5.2 per cent — and tightening of global financial conditions are complicating matters. Foreign investors have turned net sellers again. In September, FPIs took out $2.1 billion from the equity markets, bringing outflows to $26.2 billion so far this year, following $18.9 billion in 2025. This also suggests that investor concerns run deeper. Analysts at Bernstein, a brokerage firm, have argued that the “case for a structural India allocation has become harder to make”. All this comes amid healthy corporate results. Ratings agency ICRA expects India Inc’s revenue growth to range between 13 and 15 per cent in the second quarter of the current financial year, though operating profit margins will continue to come under pressure.

Near-term movements will continue to be impacted by both global and domestic factors. On the external front, after the US Fed’s recent interest rate hike, markets will parse upcoming data for clues on the trajectory of interest rates. Alongside, the duration and intensity of the conflict in West Asia and its implications for energy markets will continue to exert influence. On the domestic front, the impact of El Niño on crop output and the extent of policy tightening — the RBI’s Monetary Policy Committee will meet next week amid expectations of a rate hike — will have a bearing.