The BSE Sensex has fallen over 1,144 points in three days, sliding from a close of 85,762.01 on December 2 to an intraday low of 84,617.49 on Wednesday. The NSE Nifty 50 has dropped nearly 1% over the same period.
By around 12:50 PM on Wednesday, the Sensex was down 316 points, or 0.37%, at 84,747, while the Nifty slipped 92 points, or 0.35%, to 26,087.
Here are the key factors behind the market’s decline:
1) Selling pressure in heavyweight stocks
Losses in index heavyweights continued to exert outsized pressure on the benchmarks. HDFC Bank shares were down 1.7% on Wednesday, while Reliance Industries shares slipped 0.4%. Trent declined 1.4% on the day, after plunging 8.6% in the previous session amid concerns over intensifying competition in the retail segment.
The drag from large-cap stocks was also evident a day earlier, when HDFC Bank and Reliance Industries, the two heaviest constituents on the index, fell 1.5% and 4.3%, respectively, amplifying benchmark losses.
The recent market movements have been devoid of any trend and clear direction and actions in a few mega stocks are influencing the overall market disproportionately, said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, adding that “For instance, yesterday despite positive institutional buying Nifty drifted down by 71 points, mainly due to sharp declines in two stocks- Reliance and HDFC Bank. The large volumes in these two stocks in the derivative and cash markets indicate activity associated with the settlement day. In other words, the sharp dips in these stocks have nothing to do with their fundamentals; it is more technical in nature.”
2) Venezuela-driven geopolitical shock
Global risk appetite has been rattled by political upheaval in Venezuela and uncertainty surrounding its petroleum reserves. The crisis escalated after a controversial U.S. military operation on January 3 led to the capture of President Nicolas Maduro and his wife, Cilia Flores, by U.S. special forces in Caracas and their transfer to the United States to face criminal charges. Maduro remains in a New York jail following his capture.
The developments have added to broader market anxiety around geopolitics and policy risk. “Going forward, there is scope for high volatility caused by events and news,” said Dr Vijayakumar, adding that “Trump tweets and actions can always influence the market. Another important event that investors should closely watch is a possible Supreme Court verdict on Trump tariffs very soon. If the verdict goes against the reciprocal tariffs, it will create huge volatility in stock markets.”
3) Weak global cues and Asia sell-off
Indian markets also tracked declines across Asia, where shares retreated as investors grappled with the ramifications of the Venezuela crisis and uncertainty over global energy supplies. Japanese equities dragged on regional benchmarks, even as commodity-linked stocks found some support after a sharp overnight rally in industrial metals.
Stocks in Tokyo came under pressure after China announced a ban on exports of dual-use items to Japan that can be used for military purposes, Beijing’s latest move following remarks by Japanese Prime Minister Sanae Takaichi on Taiwan. The cautious tone across global markets spilt over into domestic trading, reinforcing the downward bias in Indian equities.
4) Technicals signal consolidation, volatility risk
Technical indicators suggest the recent decline is part of a broader corrective or consolidation phase rather than a breakdown in the longer-term trend, though elevated volatility remains a near-term risk.
“Since 1991, the Nifty 50 has witnessed seven major bullish cycles, with most rallies extending for 40–55 months, followed by corrective phases,” said Jaykrishna Gandhi, Head–Business Development–Institutional Equities at Emkay Global. He noted that “post-2009, these corrections have largely shifted from sharp price declines to time-wise consolidations, reflecting improved structural strength.” According to Gandhi, the index has “recently completed a ~1-1.5-year time correction, which historically has been followed by the resumption of a bullish trend,” with upside potential seen “up to 28,500, with positional support band at 25,500-25,300.”
Sectorally, Gandhi pointed to strength in pharmaceuticals, saying “Nifty Pharma has confirmed a breakout from an ‘inverted head and shoulder’ pattern, indicating bullish continuation with upside potential toward 24,000–24,500,” while adding that the bullish bias remains intact “above 23,500.”
Near-term technical signals, however, point to choppiness. “A strong close on Friday near the upper bollinger band suggests continuation of upside momentum. Oscillators are accommodative as well,” said Anand James, Chief Market Strategist at Geojit Investments. At the same time, he cautioned that “VIX being near record indicates potential for rise in volatility,” reflecting the risk of sharp swings even within a broadly constructive technical setup.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)