Sensex crashes 950 points, investors lose ₹5 lakh crore— Why did the stock market fall? Explained with 5 key factors

Stock market today: A sharp selloff engulfed the Indian stock market on Friday, February 27, dragging the benchmarks down by more than 1% each amid persisting geopolitical uncertainties and a sharp jump in crude oil prices.

The Sensex crashed 961 points, or 1.17%, to close at 81,287.19, while the Nifty 50 plunged 318 points, or 1.25%, to end at 25,178.65. The BSE 150 MidCap Index crashed 1.09%, while the BSE 250 SmallCap Index declined 0.86%.

Investors got poorer by more than ₹5 lakh crore as the overall market capitalisation of BSE-listed firms dropped to ₹463 lakh crore from ₹468.5 lakh crore in the previous session.

Why did the stock market fall?

Let's take a look at five key factors behind Friday's market selloff:

1. Geopolitical uncertainties

Geopolitical uncertainties continue to weigh on market sentiment amid the absence of a fresh domestic trigger.

The US-Iran talks ended without a deal. While talks are likely to continue, uncertainty persists over the next move of the US.

US Secretary of State Marco Rubio on Wednesday said that Iran continues to pose a “very grave threat” to the U.S.

US President Trump, in the longest-ever State of the Union address, hinted at a military attack on Iran, reiterating that he would not allow Tehran to possess nuclear weapons.

2. Crude oil trades above $71

Brent Crude jumped over 1% during Friday's session and continued trading above the $71 per barrel mark amid persisting uncertainty over the US-Iran nuclear talks.

Concerns that an inconclusive dialogue between the two countries will increase tensions in the Middle East, disrupt the commodity's supply, and raise prices.

Elevated crude oil prices are bad for major importers like India as they can exert pressure on the domestic currency, trigger foreign capital outflow and distort the country's fiscal maths.

3. Inconsistent foreign capital flow

Foreign institutional investors (FIIs) have started buying Indian stocks in the cash segment in February after seven consecutive months of selloff. However, they continue booking profits, as the domestic market's valuations remain slightly elevated and the domestic currency continues to hover near the 91 mark.

On February 26, FIIs sold Indian stocks worth ₹3,466 crore in the cash segment. For February, till the 26th, FIIs have bought Indian stocks worth ₹896 crore in the cash segment.

4. Banking, auto, metal see sharp profit booking

Heavyweight sectors like banking, metal, auto, and FMCG witnessed strong profit booking after the recent gains, which pulled the benchmarks down.

Experts highlight that the market is witnessing stock-specific action amid a lack of major domestic triggers.

"At the index level, the market has been in a consolidation mode for three months now, without any significant breakouts or breakdowns," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, observed.

Vijayakumar highlighted that while the Nifty delivered a 13% return over the last year, six stocks in the index delivered returns above 50%, with Stiram Finance leading the pack with a 92% return. Five stocks in the Nifty delivered above 20% negative returns during this period. The significant takeaway from this divergent performance is that it is a stock-picker’s market. This trend is likely to continue, said Vijayakumar.

5. Q3 GDP print in focus

To some extent, market weakness can also be attributed to the Q3 GDP prints. The first gross domestic product (GDP) under the new series will be released on Friday, February 27.

According to the State Bank of India (SBI), the Indian economy is likely to have expanded 8.0-8.1% in the December quarter. As per a Mint poll of 18 economists, India's economy likely grew at 7.4% during October-December.

While growth numbers are expected to be healthy, the focus will be on nominal GDP, which has been weak of late, weighing on market sentiment.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.