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Sensex crashes over 1000 points, Nifty slumps as MSCI index rebalancing sparks heavy FII selling, global tensions and rising crude deepen volatility
Markets are likely to remain volatile in the coming sessions as investors assess the impact of MSCI’s index changes and global geopolitical tensions
Indian stock markets plunged sharply on Thursday, with the Sensex crashing over 1,000 points in late trade after MSCI’s quarterly index rebalancing triggered heavy selling by foreign investors.
The BSE Sensex fell as much as 1,092 points before recovering slightly, while the NSE Nifty also witnessed a steep decline amid intense volatility during the final hour of trading.
Market experts said the sell-off was largely linked to MSCI’s rebalancing exercise, under which global index provider MSCI adjusted the weightage of several Indian stocks in its indices. The changes forced passive foreign funds and exchange-traded funds tracking MSCI indices to realign their portfolios before the market close.
Stocks Recorded Increased Weightage, Some Faced Reductions
As part of the rejig, some stocks saw increased weightage while others faced reductions or exclusions, leading to sharp buying and selling activity. Analysts said billions of dollars worth of trades were executed during the closing session because of these adjustments.
Foreign institutional investors (FIIs) were seen aggressively selling shares in banking, financial and large-cap stocks, dragging the broader market lower. Midcap and smallcap stocks also came under pressure.
Weak global cues and concerns over rising geopolitical tensions in West Asia further dampened investor sentiment. Rising crude oil prices added to worries over inflation and India’s import bill.
Experts said MSCI rebalancing is a routine exercise carried out periodically to reflect changes in market capitalisation and liquidity of stocks. However, it often leads to short-term volatility due to large institutional trades.
Despite the sharp fall, analysts said domestic economic fundamentals remain stable, though markets may continue to remain volatile in the near term due to global uncertainties and foreign fund movements.
What To Expect Next?
Reports say, markets are likely to remain volatile in the coming sessions as investors assess the impact of MSCI’s index changes and global geopolitical tensions.
Analysts expect foreign fund flows to stabilise after the rebalancing-related selling pressure eases. Attention will now shift to global crude oil prices, US economic data and domestic macroeconomic indicators. Experts believe long-term market fundamentals remain intact, but short-term fluctuations may continue due to uncertainty in global markets and cautious investor sentiment after Thursday’s sharp sell-off.
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