Snapping a three-session gaining streak, Indian equity markets came under sharp selling pressure on Thursday, with benchmark indices - the Sensex and Nifty - falling over 2.5% in early trade, wiping out nearly ₹8 lakh crore in investor wealth.

Sentiment turned sharply negative after Brent crude surged to $111 following Israel’s strike on Iran’s largest LNG facility. Adding to the pressure, the U.S. Federal Reserve maintained a status quo while signalling a mildly hawkish stance, further dampening global risk appetite.

Amid heightened geopolitical uncertainty, the BSE Sensex plunged as much as 2,019 points, or 2.6%, to an intraday low of 74,685, while the NSE Nifty50 dropped 597 points, or 2.5%, to 23,181. The broader markets mirrored the weakness, with the Nifty MidCap and Nifty SmallCap indices declining 2.4% and 2%, respectively.

All Sensex stocks in the red

All 30 constituents of the Sensex traded in the red, led by HDFC Bank, which slumped over 8% after its part-time chairman and independent director Atanu Chakraborty resigned with immediate effect on Wednesday.

Other major losers included Larsen & Toubro, Bajaj Finance, Eternal, IndiGo, and Asian Paints, each declining between 2% and 4%. IT stocks also remained under pressure, with Infosys, Tech Mahindra, and Tata Consultancy Services falling up to 2%. Banking and financial stocks such as Axis Bank, ICICI Bank, and Kotak Mahindra Bank also traded lower, weighing on the indices.

Broad-based sell-off across sectors

The sell-off was broad-based, with all sectoral indices trading in negative territory. Nifty Private Bank and Nifty Realty indices led the losses, falling over 3% each.

Rate-sensitive and consumption-oriented sectors also faced pressure, with the Nifty Consumer Durables index declining 2.58% and the Nifty Auto index slipping 2.53%. Financials remained weak, as the Nifty Financial Services 25/50 index dropped 2.79% and the Nifty PSU Bank index fell 2.13%.

Other sectors also saw declines, with the Nifty IT index down 1.65%, while the Nifty Metal and Nifty FMCG indices fell 1.56% and 1.79%, respectively. Even defensive segments were not spared, with the Nifty Pharma and Healthcare indices slipping 1.42% and 1.59%. Meanwhile, the Nifty Oil & Gas index declined 1.26% and the Nifty Media index dropped 0.91%.

Experts flag volatility amid crude, geopolitical risks

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said markets have turned highly volatile in response to developments on the geopolitical front and crude price movements. He warned that the recent three-day recovery could be reversed if tensions escalate further.

“If Brent remains above $110 for an extended period, it will have negative implications for India’s macroeconomic outlook. GDP growth and corporate earnings for FY27 could come under pressure. However, given the rapidly evolving situation, a sharp reversal in crude prices cannot be ruled out,” he said.

Echoing similar concerns, Devarsh Vakil, Head of Prime Research at HDFC Securities, noted that rising crude prices and global risk aversion are weighing on equities.

“Indian markets are under pressure due to escalating tensions in West Asia and surging Brent crude amid supply disruption fears. The Fed’s hawkish stance, signalling fewer rate cuts, is adding to the global risk-off sentiment,” he said.

The U.S. Federal Reserve kept interest rates unchanged in its latest policy meeting, while indicating a slower pace of easing. Fed Chair Jerome Powell flagged “unusually high uncertainty,” citing geopolitical tensions. The central bank projected just one rate cut this year and revised its inflation forecast higher to 2.7% from 2.4% earlier.

Ponmudi R, CEO of Enrich Money, said the spike in crude prices has reignited inflation concerns globally at a time when monetary conditions remain tight.

“For India, elevated crude prices directly impact inflation and the import bill, putting pressure on the macro environment. Continued foreign institutional investor (FII) selling also reflects a risk-off stance, with sustained outflows weighing on market stability,” he added.

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