The Indian stock market witnessed a sharp downturn on Thursday, May 22, with the Sensex dropping 645 points, or 0.79%, to close at 80,951.99. Similarly, the Nifty 50 declined by 204 points, or 0.82%, ending the day at 24,609.70. Despite the broader market slide, mid and small-cap stocks held up relatively well — the BSE Midcap index dipped 0.33%, while the BSE Smallcap index edged up by 0.17%.
After registering a moderate gain of around 0.5% in the previous session, the markets resumed their decline. During intraday trade, the Sensex plunged over 1,100 points and the Nifty slipped below the 24,500 level.
The Sensex opened at 81,323.05, down from its last close of 81,596.63, and hit a low of 80,489.92 — a drop of 1,107 points or 1.4%. The Nifty 50 started at 24,733.95 versus its previous close of 24,813.45 and hit an intraday low of 24,462.40, also registering a 1.4% decline.
By session’s end, the Sensex and Nifty had trimmed some losses, closing 645 and 204 points lower respectively. In terms of market capitalisation, the total value of companies listed on the BSE shrank by nearly ₹2 lakh crore, falling from approximately ₹441 lakh crore to ₹439 lakh crore.
What Triggered the Market Sell-Off Today?
Market analysts identified five primary factors behind the day’s broad-based weakness:
- Mounting U.S. Debt Concerns – Investors are increasingly anxious about the growing U.S. fiscal deficit, exacerbated by President Donald Trump’s tax and spending plans. Reports suggest the proposed tax bill, likely to be passed this week, could add $3.8 trillion to the already massive $36 trillion U.S. debt burden. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that weak demand at the U.S. 20-year bond auction and rising yields across 5-, 10-, and 30-year bonds are signs of eroding investor confidence in U.S. government securities.
- Heightened Middle East Tensions – Geopolitical instability also weighed on investor sentiment. According to CNN, the U.S. has obtained intelligence indicating that Israel might be planning a strike on Iranian nuclear sites. Reuters added that Oman’s foreign minister has confirmed upcoming nuclear negotiations between Iran and the U.S., further highlighting tensions in the region.
- Absence of Fresh Domestic Catalysts – Domestically, markets are struggling due to a lack of clear positive triggers. Investors are waiting for more clarity on U.S.-India trade talks and the broader economic outlook. Analysts from Kotak Securities observed that while India’s macro indicators remain strong, micro-level fundamentals are weakening. They pointed to consistent downgrades in earnings estimates across sectors and market capitalisations.
- Overstretched Valuations – Indian equities, particularly large-cap stocks, have seen valuations soar amid recent rallies. Mid- and small-cap stocks are also trading at expensive multiples, raising fears of a potential market correction. According to Kotak, market enthusiasm is being driven by speculative narratives — the latest being defence — without substantial backing, a trend reminiscent of similar boom-and-bust cycles seen in the past few years.
- Tepid Q4 Results Fail to Inspire – The Q4FY25 earnings season has been largely uninspiring. Kotak Securities reported that Nifty 50 companies posted a modest 7.5% annual growth in net profits. Sectors including consumer goods, investment firms, banking, and IT services are grappling with issues ranging from sluggish demand to margin pressure. This lack of robust earnings momentum has further dampened investor confidence.