Market rout intensifies: Sensex falls 824 points as IT and mid & small caps drive decline

Equity markets extended their losses on Monday, with the benchmark BSE Sensex plummeting 824.29 points or 1.08 per cent to close at 75,366.17, while the broader NSE Nifty fell 263.05 points or 1.14 per cent to end at 22,829.15, thier seven-month lows. The sell-off was particularly severe in the broader market, with the Nifty Next 50 dropping 2.82 per cent and Nifty 500 declining 1.91 per cent.

Nifty Small-cap 100 crashed 3.84 per cent and the Nifty Mid-cap 100 plunged 2.75 per cent, both posting their worst session since January 13. All the sectoral indices registered losses. On the other hand, volatility index India VIX surged 8.28 per cent to 18.13, signalling the rising anxiety among investors.

Market breadth was overwhelmingly negative, with 3,519 stocks declining against just 597 advances on the BSE. A significant 494 stocks hit their 52-week lows, while 710 stocks were locked in the lower circuit, highlighting the depth of the market weakness.

The IT sector led the decline following developments in the artificial intelligence space. “Weak global cues led by losses in tech names after China’s AI start-up DeepSeek upended the AI race led to a sharp reaction in IT sector which led the losses today,” said Satish Chandra Aluri of Lemonn Markets Desk.

Huge sell-offs

Among major losers, HCL Tech tumbled 4.59 per cent, followed by Tech Mahindra (-4.18 per cent), Wipro (-3.78 per cent), Hindalco (-3.53 per cent), and Shriram Finance (-3.22 per cent). However, some defensive stocks showed resilience, with Britannia gaining 1.50 per cent, ICICI Bank rising 1.33 per cent, Mahindra & Mahindra adding 1.02 per cent, Hindustan Unilever up 0.97 per cent, and SBI advancing 0.45 per cent.

The market sell-off was exacerbated by continued Foreign Institutional Investor (FII) outflows. “FIIs are on a selling spree due to moderation in economic growth and INR depreciation. The weak sentiments were further exacerbated as the US trade confrontation continued, like with Colombia this time,” noted Vinod Nair, Head of Research at Geojit Financial Services.

The Indian rupee weakened by 0.07 paise to close at 86.28 against the US dollar. “The selling pressure is partly fueled by global trade uncertainties, with the U.S. making unfavorable or adjustable tariff changes, potentially altering money flow patterns,” explained Jateen Trivedi of LKP Securities.

Negative outlook

Technical analysts suggest more weaknesses  ahead. “The 23,000/76,300 level will be key to watch, as long as it trades below this threshold, weak sentiment is likely to continue. On the downside, the market could slip to 22,750-22,650/75,200-74,800,” said Shrikant Chouhan of Kotak Securities.

The market faces multiple headwinds in the coming days. “Volatility is here to stay this week ahead the upcoming events risk like the FOMC meeting, expiry week, and Union budget,” added Nair.

Sectoral performance was uniformly negative, with the Capital Markets and Media indices being the worst hit, declining 5.6 per cent and 4.5 per cent respectively. The broader market witnessed significant pressure, with mid- and small-cap stocks continuing their downward trajectory due to concerns over rich valuations.

“A combination of factors like weak US and European market cues, monthly F&O expiry later this week, persistent FII fund outflows, and muted third quarter corporate earnings so far have continued to push investors in reducing their equity exposure,” said Prashanth Tapse of Mehta Equities Ltd.

Looking ahead, market participants will closely watch the upcoming Federal Reserve meeting and the Union Budget for further direction. The Nifty’s technical setup suggests continued weakness, with 22,500 being the next potential support level if the current downtrend persists.