Sensex Crashes 1,000 Points From Day's High, Know- 5 Key Reasons Behind Nifty's 200-Point Fall

Mumbai: Indian equities experienced a sharp decline on Monday as the Sensex fell over 1,000 points from its peak, while the Nifty dropped more than 200 points despite a stronger rupee and lower crude oil prices. The selling intensified as profit-taking continued, foreign fund outflows persisted, and liquidity concerns grew. Here are the five key factors behind the market drop:

1. RBI's Liquidity Measures: The Reserve Bank of India's (RBI) attempts to support the rupee raised questions about the banking system's liquidity. The central bank planned to sell bonds worth Rs 25,000 crore on Tuesday to absorb the excess liquidity.

2. New Cash Reserve Ratio Requirement: From October 16, banks had to maintain 99 percent of their daily cash reserves, up from the previous 90 percent. This tightened daily cash reserve rules, affecting bank profitability and market confidence.

3. Post-Friday Profit Booking: Following a strong rally on Friday, investors took profits after the Nifty gained 288.65 points, closing at 22,520.45. However, the rise did not hold as selling intensified at higher levels.

4. Foreign Investor Selling: Persistent foreign portfolio investor (FII) withdrawals continued to depress market sentiment. Foreign investors withdrew Rs 44,166 crore from Indian stocks so far in October, with shares worth Rs 3,568 crore sold on October 9 alone.

5. Rising Market Volatility: India's VIX volatility index jumped nearly 4 percent, signaling increasing uncertainty among investors. A rising VIX suggests expectations of more significant market swings, although it does not guarantee further declines. Investors remained cautious about entering new positions due to this heightened volatility.