Equity markets witnessed a sharp selloff on Monday, with the benchmark Sensex plunging 1,048.90 points or 1.36 per cent to close at 76,330.01, while the Nifty 50 fell 345.55 points or 1.47 per cent to end at 23,085.95, as the rupee sank to an all-time low against the US dollar.

The Indian rupee recorded its steepest single-day fall in nearly two years, declining 58 paise to close at a historic low of 86.62 against the US dollar. The currency’s unprecedented decline was attributed to aggressive dollar buying by investors and substantial foreign capital outflows from Indian equities.

All sectoral indices ended in negative territory, with Realty and Media sectors bearing the brunt of the selling pressure, declining 6.47 per cent and 4.54 per cent respectively. The broader markets faced even steeper declines, with the Nifty Next 50 falling 4.32 per cent and Nifty Midcap Select dropping 3.82 per cent.

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Among individual stocks, TCS led the gainers on the NSE, rising 0.78 per cent, followed by IndusInd Bank (+0.58 per cent), Axis Bank (+0.46 per cent), and Hindustan Unilever (+0.12 per cent). On the flip side, Adani Enterprises was the top loser, falling 6.21 per cent, followed by Trent (-5.40 per cent), BPCL (-4.39 per cent), BEL (-4.37 per cent), and Power Grid (-4.09 per cent).

Market breadth was significantly negative, with 3,562 stocks declining against just 555 advances on the BSE. The number of stocks hitting 52-week lows (508) far exceeded those reaching 52-week highs (120), reflecting the broad-based selling pressure.

“US imposing sanctions on Russian oil exports pushed the rupee to a fresh low against the dollar, which in turn triggered massive correction in domestic equity markets as overseas investors continued to desert the local share market,” said Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd.

Foreign Institutional Investors (FIIs) have withdrawn ₹22,194 crore from Indian equities so far this month, with ₹2,254.68 crore being pulled out on Friday alone. The country’s forex reserves also dropped by USD 5.693 billion to USD 634.585 billion in the week ended January 3.

Vinod Nair, Head of Research at Geojit Financial Services, explained the global context: “The global markets witnessed a significant sell-off, prompting a similar response in domestic markets due to strong US payroll data suggesting fewer rate cuts in 2025. This has strengthened the dollar, driven up bond yields, and made emerging markets less attractive.”

The US dollar index climbed 0.29 per cent to reach a two-year high of 109.80, while US 10-year bond yields rose by 0.48 per cent to touch 4.79 per cent. Brent crude futures surged 1.12 per cent to USD 80.65 per barrel, adding to market concerns.

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On the domestic macroeconomic front, retail inflation eased to 5.22 per cent in December from 5.5 per cent in November 2024, while industrial production growth accelerated to a six-month high of 5.2 per cent year-on-year in November 2024.

Technical analysts suggest further weakness ahead. “Nifty is on the way down to the next lower support of around 22,800-22,700 levels. Any pullback up to 23,350 could be a sell-on-rise opportunity,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

The India VIX, which measures market volatility, increased by 7.25 per cent to 16.0, indicating heightened fear in the market. Analysts expect volatility to persist in the near term, with the upcoming 2025 budget, Q3 results, RBI policy, and Trump’s policies being key factors to watch.