Sensex plunges 700 points, Nifty closes below 24,000: Key triggers

Indian equity markets witnessed a brutal sell-off on Wednesday, with the benchmark BSE Sensex crashing over 700 points and the NSE Nifty 50 ending the session below the psychologically important 24,000 level. The sharp decline erased gains from the previous two trading sessions and left investors nursing heavy losses.

Global cues weigh heavy

The primary trigger for the crash was a weak handover from global markets. Overnight losses on Wall Street, driven by disappointing US corporate earnings and renewed fears of interest rate hikes, set a negative tone for Asian peers. Markets in Japan, South Korea, and China also traded in the red, compounding the pressure on Indian indices.

Analysts pointed to a spike in US bond yields and a strengthening dollar as key headwinds. Foreign portfolio investors (FPIs) have been pulling money out of emerging markets, including India, in response to these global shifts.

Broad-based selling across sectors

The sell-off was not restricted to a few stocks. All major sectoral indices ended in the red, with information technology (IT), banking, and auto stocks bearing the brunt. The Nifty IT index fell over 3%, dragged down by heavyweights like Infosys and Tata Consultancy Services, as concerns over a slowdown in client spending in the US resurfaced.

Banking stocks, which had been a driver of the recent rally, also came under heavy fire. The Nifty Bank index dropped nearly 2%, with HDFC Bank and ICICI Bank contributing significantly to the losses. Analysts said profit-booking at higher levels added to the downward momentum.

Midcaps and smallcaps hit hard

The pain was more acute in the broader market. The BSE Midcap index fell over 2%, while the BSE Smallcap index lost nearly 3%. This suggests that risk appetite has diminished sharply among retail and institutional investors alike.

Market participants said that the absence of any fresh domestic triggers left the market vulnerable to global shocks. With the earnings season tapering off, traders are now focused on the US Federal Reserve's upcoming monetary policy decision, which could provide clues on the trajectory of interest rates.

Technical breakdown adds to anxiety

From a technical perspective, the Nifty's close below 24,000 is seen as a bearish signal. Traders said that the index had been consolidating in a narrow range over the past week and the breakdown on Wednesday could lead to further weakness. The next key support level is seen around 23,700.

Volatility index India VIX surged over 10% during the session, indicating heightened fear among traders. Options data suggests that put writers have been active at lower strikes, but the overall sentiment remains cautious.

All eyes are now on the US market opening later in the day. If selling persists on Wall Street, Indian markets could see another gap-down opening on Thursday.