Sensex, Nifty roiled! Key factors behind Wednesday's market crash

Stock market today Sensex Nifty: Even as Indian equities started the day on a positive note, tracking positive global cues, they came under heavy selling pressure later in the day, engulfing all the sectors, and remained deep in the red until the closing bell. Benchmark index Sensex slipped nearly 1.5 per cent while the Nifty tumbled over 1.7 per cent during the day. At close, Sensex stood at 72,761.89, down 906.7 points, or 1.23 per cent while the Nifty ended at 21,997.70, down 338 points or 1.51 per cent. 

Here are the likely reasons for the fall:

All sectors bleed

The weakness in the broader markets also spilled over to all sectors, with real estate and metals stocks falling by a substantial 6 per cent, followed by energy and PSU Bank stocks.

Bubble bursting?

The high froth in the midcap and smallcap indices is now settling as the gauges see a heavy correction, and this correction is weighing on the heavyweights too. 

Gaurang Shah, Senior Vice President, Geojit Financial Services, on the meltdown in the broader markets, said, "Excessive liquidity drove up midcap and smallcap stock prices, often exceeding their justified values based on earnings. The surge in funds flowing into these segments compelled fund managers to invest, further inflating valuations. Authorities have acknowledged the situation and proposed potential regulations. Given the historical volatility of small and midcap stocks, investors must exercise caution in allocating funds, whether directly in stocks or through mutual fund SIPs.”

Heavyweights tumble

Most heavyweights, including the likes of Reliance Industries and NTPC, saw sharp cuts up to 5 per cent, which added to the woes of the D-Street, piling up investors' losses for the session.

Other reasons

Asian markets showed a mixed performance despite gains in the overnight trade in the US, as hot inflation in the US reduced the probability of an early rate cut by the Federal Reserve. Nevertheless, European markets continued to trade higher, with the French CAC index up by 0.4 per cent.