The stock market recently witnessed a notable shift in trading patterns, with a strong opening session eventually giving way to heavy selling pressure in the final hour. On Friday, a similar trend was observed, but the latest decline was significantly sharper, surprising investors and triggering widespread losses across the market.
In the last 30 minutes of trading, a sudden surge in volatility led to a steep fall in market capitalization. Investors reportedly lost nearly ₹5.56 lakh crore in valuation, as the overall market sentiment turned negative during the closing phase.
By the end of the trading session, the Sensex had dropped 1,092 points, or 1.45%, to close at 74,775, while the Nifty declined 359 points, or 1.50%, settling at 23,547. Broader markets also weakened, with midcap stocks falling nearly 1% and small-cap stocks declining around 1.30%.
As a result of this decline, the total market capitalization of BSE-listed companies fell from approximately ₹470 lakh crore to ₹465 lakh crore.
Two key factors behind the late-session selloff
Market analysts pointed to two major developments that intensified selling pressure during the final half hour of trading:
1. Concerns over monsoon forecast revision
Investor sentiment weakened after the India Meteorological Department revised its monsoon forecast downward. The revised outlook raised concerns about weaker-than-expected rainfall, which could negatively impact the agricultural sector.
Given India’s heavy dependence on monsoon rains, the development sparked fears of reduced rural income, weaker agricultural output, and slower growth in rural demand. Analysts believe this could also have a broader impact on corporate earnings, especially in sectors linked to consumption and agriculture.
2. MSCI index rebalancing impact
Additional pressure emerged around 3 PM following updates related to MSCI index changes, set to take effect from May 29. MSCI, one of the world’s largest global index providers, influences billions of dollars in passive fund flows that track its indices.
When stocks are added or removed from MSCI indices, institutional investors and index funds are required to rebalance their portfolios accordingly. This leads to large-scale buying and selling, often causing short-term volatility in affected stocks.
The anticipation of these adjustments led to increased trading activity, contributing to the late-session volatility and overall market weakness.
Heavy selling in major stocks
Among individual stocks, major selling pressure was seen in large-cap names such as Reliance Industries, IndiGo, and Power Grid Corporation, which were among the biggest contributors to the decline.
Overall, the combination of macroeconomic concerns related to the monsoon and global index-driven fund rebalancing created a sharp downturn in sentiment, leading to a volatile close for the Indian equity markets.