Indian equity benchmarks witnessed sharp selling pressure on Friday, with the Sensex plunging more than 1,000 points and investors losing nearly Rs 5 lakh crore in market value, as concerns over a weak monsoon, uncertainty around a US-Iran peace deal and continued foreign investor selling weighed on sentiment.
The Sensex closed 1,092 points lower at 74,775.74, while the Nifty50 fell more than 359 points to settle at 23,547.75. Market volatility also surged, with India VIX jumping around 9 per cent.
Here are the key factors behind today’s selloff:
1. IMD forecasts weakest monsoon in 11 years
Investor sentiment took a hit after the India Meteorological Department (IMD) projected below-normal rainfall for the June-September monsoon season.
“Monsoon rainfall from June to September will be ‘below normal’ and is likely to be 90% of the long-period average,” M Ravichandran, secretary at the Ministry of Earth Sciences, said during a briefing.
A weaker monsoon raises concerns about food inflation, rural demand and overall economic activity, particularly if El Niño conditions intensify.
“The market witnessed broad-based selling pressure following the IMD’s monsoon forecasts to 90% of the long-period average (LPA), raising concerns among investors,” said Vinod Nair, Head of Research at Geojit Investments.
“The prospect of deficient rainfall, coupled with the increasing likelihood of an El Niño weather pattern, has heightened fears of elevated food inflation in the coming months,” he added.
2. Iran-US peace deal remains uncertain
Global markets also remained cautious amid uncertainty surrounding efforts to formalise a peace agreement between the US and Iran.
Reports indicated that both sides have agreed to extend the existing ceasefire by 60 days, although the proposal is yet to receive approval from US President Donald Trump.
US Vice President JD Vance said negotiators were “very close” to a deal but acknowledged that discussions were continuing over key issues, including uranium enrichment.
The absence of a final agreement has kept investors worried about geopolitical risks and energy markets.
3. Persistent FII selling
Foreign institutional investors (FIIs) continued to remain net sellers in Indian equities.
According to provisional NSE data, foreign investors sold shares worth Rs 1,043 crore on Wednesday. FIIs have been net sellers in 13 of the 18 trading sessions so far in May.
The sustained outflow has added pressure on domestic equities despite relatively resilient corporate earnings.
Market experts said the pace of foreign selling has moderated and corporate earnings have remained better than expected.
“A positive trend from the market perspective is that Q4 results have been better-than-expected. The double-digit earnings growth in financials, automobiles and metals is impressive,” said VK Vijayakumar of Geojit Investments, ET quoted.
“Trends indicate that FY27 will be good for defence, capital goods, renewable energy, financials and pharmaceuticals. Growth sectors like digital platform companies are getting accumulated on declines,” he added.
The selloff was broad-based, with Power Grid, IndiGo, Bajaj Finance, UltraTech Cement, Tata Steel, Sun Pharma and NTPC among the major losers, while Tech Mahindra and HCLTech bucked the trend and ended higher.