September rout makes history: Nifty posts worst monthly fall in 8 years, worst series drop since 2001

In the first half of FY27, Indian equities struggled, with September standing out as the weakest month since 2018 for the Nifty 50. The index closed September at 22,620.45, marking a 6.1% decline during the month. However, the NSE 50 index had gained 1.3% over the same period. Foreign Portfolio Investors (FPIs) shifted to a risk-averse stance in September, driven by inflation concerns and crude oil prices surging above $100/barrel, prompting global central banks to raise interest rates.

The US Federal Reserve raised the key interest rate in September, followed by central banks in Europe, Japan, and Australia. As a result, FPIs withdrew ₹25,662 crore from Indian equities in September, ending a two-month buying trend. Meanwhile, they invested ₹8,551 crore in the primary market, indicating continued active participation in new issuances despite ongoing selling.

Domestic Institutional Investors (DIIs) maintained a strong presence, investing ₹52,617 crore during September to support liquidity amid foreign outflows. The market capitalization of NSE-listed stocks fell to ₹467 lakh crore as of September 2026, down from ₹469 lakh crore in June 2026, although it increased nearly 14% from ₹410 lakh crore in March 2026.

Ajit Mishra, SVP–Research at Religare Broking, noted that the Nifty had been correcting over six years since its September 2024 peak, with the recent decline erasing earlier gains. The broader market faced pressure during September, although mid- and small-cap stocks showed resilience in some periods. None of the sectoral indices closed in profit in September.

Nifty IT, Bajaj Finserv, and Infosys were the worst performers, with declines of nearly 12%, 14.3%, and 12.3%, respectively. Brent's price decline offered more relief than prior minor drops, but it was insufficient to trigger a broad market recovery. Analysts expect the Reserve Bank of India to raise rates in the upcoming October 7 meeting, as inflation continues to rise.

Over the coming months, the September sell-off has spotlighted corporate earnings, crude prices, foreign flows, and monetary policy as critical factors. Nifty is currently testing the 22,600 level, coinciding with its 200-week moving average, and a decisive break above 23,000-23,100 could signal a meaningful market recovery.