Mumbai: Indian equity markets came under heavy selling pressure on Monday, September 28, as the Sensex plunged more than 1,000 points and the Nifty 50 slipped below the crucial 22,800 level. Rising crude oil prices, elevated US Treasury yields, renewed geopolitical uncertainty surrounding the US-Iran conflict, foreign portfolio investor (FPI) selling and a sharp rise in market volatility combined to weigh on investor sentiment.
The sell-off extended a weak trend that has already taken Indian benchmarks through their seventh consecutive weekly decline, the longest such losing streak since 2020. The Nifty 50 had opened lower and moved towards a six-month low, while the Sensex also came under sustained pressure across sectors.
By afternoon trade, the Sensex had fallen more than 1,000 points from the previous close, while the Nifty traded below 22,800. The broad-based nature of the decline indicated that selling was not restricted to a handful of heavyweight stocks. Banking, financial services, realty, automobile and other sectors faced significant pressure.
1. Crude oil prices surge above $106
The biggest immediate trigger for the sell-off was the renewed rise in crude oil prices. Brent crude futures climbed above $106 a barrel on Monday as uncertainty surrounding the Middle East conflict increased following a stalemate in US-Iran diplomatic efforts.
Brent crude was reported around $105.64 a barrel during the session after rising more than 1%, while other market reports placed it around $106.5-$106.7 a barrel.
Higher crude prices are particularly important for India because the country relies heavily on imported oil. A sustained increase in crude can raise the import bill and put pressure on inflation, while also increasing costs for companies that depend on fuel and other petroleum-linked inputs.
The rise in oil prices therefore created concerns on several fronts at the same time — inflation, the rupee, corporate margins and India’s external balance.
2. US Treasury yields remain elevated
Another major pressure point is the rise in US bond yields. The benchmark 10-year US Treasury yield had moved above 5%, while the 30-year yield also remained elevated.
Higher US Treasury yields can make dollar-denominated fixed-income assets relatively more attractive to global investors. They can also increase borrowing costs and encourage international investors to reassess allocations to emerging markets such as India.
Market strategist V K Vijayakumar of Geojit Investments said the Indian economy and corporate earnings could remain resilient even as external factors weigh on equities. He described crude prices around $106 and the US 10-year yield around 5.2% as significant external headwinds for Indian markets.
The combination of expensive oil and elevated global bond yields has therefore created a difficult environment for risk assets.
3. US-Iran tensions fuel geopolitical uncertainty
Geopolitical concerns added another layer of uncertainty to the market.
US President Donald Trump said he had rejected an Iranian proposal aimed at resolving the conflict and reopening the Strait of Hormuz. Iran, meanwhile, maintained that diplomacy was the way to resolve the conflict involving the US and Israel.
The Strait of Hormuz is particularly important for global energy markets because of its role in the movement of crude oil and other petroleum products.
Investors are consequently watching developments in the region for signs of potential disruption to oil supplies. Any prolonged uncertainty could keep crude prices elevated, which would be an additional concern for oil-importing economies.
The geopolitical situation has also contributed to volatility in other commodities and global financial markets.
4. Foreign investors return to selling
Foreign portfolio investor flows have also remained a concern for Indian equities.
According to provisional exchange data, FPIs sold Indian equities worth Rs 3,693.93 crore on September 25, while domestic institutional investors were net buyers of around Rs 2,838.17 crore.
Foreign investors had turned buyers during parts of July and August, but selling resumed in September. Persistent foreign outflows can increase pressure on large-cap stocks and the benchmark indices, particularly when global investors are simultaneously responding to higher US yields, stronger risk aversion and geopolitical uncertainty.
Vijayakumar noted that foreign investors were selling large-cap stocks while continuing to show interest in some mid- and small-cap shares, although valuations in parts of the broader market remain elevated.
The flow data therefore remain an important indicator for investors as they assess whether the current pressure is temporary or likely to persist.
5. India VIX jumps as volatility rises
The India VIX, commonly referred to as India’s volatility gauge, also rose sharply during Monday’s sell-off.
The index surged by more than 15% during the session, while reports said it had risen by almost 40% over three sessions. The increase reflected heightened uncertainty among market participants.
A sharp rise in India VIX generally indicates that traders are expecting larger price movements in the near term. This can amplify selling when investors become more risk-averse.
The rupee also weakened against the US dollar during the session, adding to concerns arising from higher imported energy costs.
Technical levels come into focus
The breach of important technical levels has added to the nervousness in the market.
Sachin Gupta, vice-president of research at Choice Broking, said the breach of 73,300 on the Sensex and 23,000 on the Nifty was significant. He said further volatility could emerge if these levels were not reclaimed.
The Nifty had been expected to find support around 23,000 after Friday’s close at 23,140.50. With the index moving below that level, the next zones being watched by technical analysts have shifted lower.
According to SBI Securities, the 22,680-22,700 region is an important support zone. A move below 22,680 could expose the index to the 22,510-22,530 range.
At the same time, the immediate focus remains on whether the Nifty can reclaim 23,000 and stabilise above it. These technical levels are market-analysis reference points rather than guarantees of future price movements.
Broad-based selling keeps investors cautious
The decline was not limited to the benchmark indices. Banking and financial stocks were among the major drags, while sectors including realty and automobiles also faced selling pressure. At various points in the session, the broader market declined alongside the large-cap indices.
The market’s weakness comes after an already difficult period for Indian equities. The Nifty and Sensex had ended lower for seven consecutive weeks, with foreign outflows, elevated crude prices and global yield concerns weighing on sentiment.
For investors, the immediate variables to monitor are crude oil prices, developments around the Strait of Hormuz, US Treasury yields, FPI flows and the Nifty’s ability to hold or reclaim key support levels.
What is driving the stock market sell-off?
The Monday decline can therefore be linked to five interconnected factors:
- Higher crude oil prices: Brent crude moved above $106 a barrel, raising concerns over India’s import bill and inflation.
- Elevated US Treasury yields: Higher global yields can make emerging-market equities relatively less attractive.
- US-Iran geopolitical tensions: Uncertainty over the Strait of Hormuz has increased concerns about energy supplies.
- FPI selling: Foreign investors sold Rs 3,693.93 crore of Indian equities on September 25.
- Higher volatility: India VIX surged sharply, signalling increased uncertainty in the market.
Together, these factors have created a risk-off environment for Indian equities.
Conclusion
Monday’s sell-off highlights how quickly external factors can affect Indian markets even when domestic economic conditions remain comparatively resilient. Rising crude oil prices, elevated US yields, geopolitical tensions and foreign fund flows are currently dominating investor sentiment.
The Nifty’s move below 23,000 and towards the 22,800 region has brought the 22,680-22,700 support zone into focus, while the Sensex is being watched around the 73,000 area.
Market participants will closely track oil prices, global bond yields, currency movements and foreign investment flows in the coming sessions. The ability of the benchmark indices to regain breached support levels could also be important in determining whether volatility eases or remains elevated.