Stock Market Crash: Nifty Slips Below 25,800, Sensex Sheds Over 700 Points — Five Key Reasons Behind Fall

India's benchmark indices extend decline for the second day as Nifty 50 and BSE Sensex fall nearly 1% as investors turned cautious ahead of the US Federal Reserve's interest rate decision on Wednesday. In addition, elevated US bond yields, the Indian rupee slipping past 90 amid persistent dollar strength, and continued FII outflows are weighing heavily on risk appetite.

The broader segment of the market was also in the negative, with the Nifty Midcap 100 falling over 1.40% and Smallcap 250 index falling 1.15%. Volatility also spiked, with India VIX rising over 2%, signalling a heightened investor nervousness.

"Indian equity markets came under pressure today, with broad-based selling triggered by weak global cues and rising caution ahead of key U.S. inflation and interest-rate signals." said Ponmudi R, CEO of Enrich Money.

Profit-booking after the recent rally is evident across frontline stocks, while IT and banking counters are witnessing mild unwinding as investors turn defensive, added Ponmudi.

Nifty 50 fell 0.90% to 25,728 level, while Sensex was down 0.85% to 84,382.96.

In the last two sessions Nifty has fallen over 400 points. In addition, Nifty smallcap 100 index fell over 6% in the last seven trading sessions.

Global caution is elevated ahead of the US Federal Reserve’s crucial policy meeting scheduled for Dec. 9-10.

With the rate decision due this midweek, investors are staying on the sidelines, anxious about the Fed’s forward guidance on interest rate cuts for 2026.

Currency depreciation has been weighing on markets massively, especially with the rupee breaching past the 90 levels against the US dollar.

Although the dollar index has been trending relatively weaker, rising concerns about inflation and sustained FII outflows, has kept the rupee above 90 levels - a key psychological marker.

Foreign investors have remained in sell-off mode, offloading equities worth Rs 11,820 crore in the first week of December alone.

In 2025 so far, FIIs have offloaded shares worth Rs 1,55,495 crore, as cautious sentiment continue to weigh on markets.

India, till date, remains one of the few countries yet to reach a trade deal agreement with the United States under the leadership of Donald Trump.

The relationship between the two countries hasn't been helped by Russian President Vladimir Putin's recent visit to India.

As the impasse continues, foreign investors are growing increasingly cautious about India.

In a latest pushback against India, United States President Donald Trump has warned that he is ready to consider rice export tariffs on agricultural exports, including Indian rice.

Trump's pushback was a direct response to farmers in the US drafting complaints about cheap foreign goods undercutting local producers.

Liquidity is being drained from the secondary market as massive funds are locked in primary market activities. Issues like Wakefit and Corona Remedies are further diverting retail and HNI liquidity away from listed stocks.