After two consecutive sessions of healthy gains, Indian stock market benchmarks, the Sensex and the Nifty 50, suffered significant losses in intraday trade on Tuesday, May 27. The Sensex opened at 82,038.20 against its previous close of 82,176.45 and crashed over 900 points, or 1 per cent, to an intraday low of 81,261.96. The Nifty 50 opened at 24,956.65 against its previous close of 25,001.15 and dropped over 1 per cent to an intraday low of 24,737.70. However, the mid and small-cap segments outperformed with mild losses.
Around 10:30 AM, the Sensex was 839 points, or 1.02 per cent, down at 81,337, while the Nifty 50 was trading 242 points, or 0.97 per cent, lower at 24,759.
Why is the Indian stock market falling today?
Here are five key reasons that could be behind the fall in the Indian stock market today:
1. Profit booking amid global weakness
Weak global cues appear to have prompted investors to book profits. Major markets in Asia, including Japan’s Nikkei and Korea’s Kospi declined amid concerns that US President Donald Trump’s tax-cut bill will widen the fiscal deficit of the US.
Tracking weak global cues, investors are booking profits after recent gains. Around 10 AM, as many as 49 stocks in the Nifty 50 index were in the red.
2. Foreign capital inflow dwindles
Foreign capital inflow appears to be losing steam. In May, FPIs sold Indian equities intermittently amid a lack of fresh positive triggers. On May 26, FPIs’ buying of Indian equities stood at a meagre ₹135.98 crore. Declining foreign capital inflow is weighing on the Indian stock market.
3. Stretched valuations
The current price-to-earnings (PE) of the Nifty 50 at 22.6 is above its one-year average PE of 22.15. The domestic market does not have a valuation comfort when earnings have not seen any notable upgrades. Experts expect the market to consolidate in the near term.
“In the near term, the market is likely to consolidate around the current levels. Since mutual funds are sitting on sizeable cash, any dip will be bought into, and high valuations will trigger selling on rallies. A sustained rally will happen only when leading indicators suggest a revival in earnings growth. That is some time away,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
4. Geopolitical uncertainty
Global uncertainty keeps investors cautious, triggering a sell-on-rise to protect their wealth.
Experts highlight that looming geopolitical risks and rich valuations may keep the market on a bouncy track in the short term.
“The recent market rally suggests that markets are expecting an improvement in earnings growth in FY26/27, backed by an improving macro. When seen against the backdrop of elevated valuations, I don’t think markets are fully pricing in the risks of a messy, protracted negotiations of tariff and trade-related issues with the US and structural issues like low wage growth,” Krishnan V R, Chief of Quantitative Research at Marcellus, told Mint.
5. Lack of immediate positive triggers
While the medium- to long-term prospects of the Indian stock market remain positive, driven by a healthy macroeconomic outlook, a forecast of an above-normal monsoon, and a strong influx of retail investors, the domestic market is struggling to sustain gains due to a lack of fresh, immediate positive triggers.
The market’s focus is now on the upcoming Q4 GDP prints on May 30 and the RBI’s monetary policy decision on June 6.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
