The BSE Sensex closed 1,092.06 points, or 1.44 per cent, lower at 74,775.74, while the NSE Nifty50 declined 359.40 points, or 1.5 per cent, to settle at 23,547.75. Selling pressure intensified sharply toward the close, with the Sensex plunging nearly 1,450 points from its intraday high of 76,220.02. The Nifty also retreated significantly from its intraday peak of 24,002.8.
Market breadth remained decisively negative, reflecting broad-based weakness across sectors. On the BSE, 2,507 stocks declined compared to 1,568 advances.
A major factor behind the market decline was growing uncertainty over the prospects of a durable peace agreement between the United States and Iran. Investors, who had fuelled a strong rebound in April following a severe correction in March, rushed to book profits amid fears that geopolitical tensions could continue.
Arun Malhotra, founder and fund manager at CapGrow Capital, said investors were unlikely to witness a sustained rise in Indian equities unless uncertainty surrounding the United States-Iran conflict was fully resolved.
The Nifty had fallen 11.3 per cent in March before recovering 7.5 per cent in April, leaving the market vulnerable to heavy profit-booking.
Losses deepened further during the final half-hour of trading after MSCI’s May index rebalancing came into effect. Passive funds tracking MSCI indices typically rebalance their portfolios at the market close on adjustment day, often resulting in heightened volatility and sharp movements in heavily weighted stocks.
According to IIFL Capital, India’s weightage in the MSCI Emerging Markets Index, which had climbed to nearly 20 per cent in July 2024, is expected to decline to around 11.2 per cent following the latest rebalancing exercise.
Although Brent crude futures declined nearly 19 per cent during May, crude prices remain more than 27 per cent higher than levels recorded before the Iran conflict. India, the world’s third-largest importer of crude oil, remains highly vulnerable to elevated energy prices, which can increase inflationary pressure and widen the current account deficit.
Analysts stated that concerns over oil prices, coupled with geopolitical uncertainty, have significantly weakened investor confidence in Indian equities.
Foreign institutional investors also remained selective toward Indian stocks amid concerns regarding high valuations, rising crude prices and the absence of a strong artificial intelligence-driven technology rally that has supported several global markets.
Heavyweight financial and information technology stocks added to the pressure on benchmark indices. Financial stocks declined 1.2 per cent, while information technology shares fell 0.9 per cent. Reliance Industries dropped 7.7 per cent during the month, exerting heavy pressure on both the Sensex and Nifty.
Among major monthly losers, ONGC declined 11.4 per cent due to profit-booking after a strong four-month rally and concerns over delays in key production projects. ITC slipped 8.9 per cent after analysts warned that recent price increases could negatively impact cigarette sales volumes.
Despite the broader weakness, certain sectors displayed resilience. Adani Enterprises surged 22 per cent after United States authorities dropped fraud charges against Gautam Adani. Metal stocks also recorded gains, with Hindalco and National Aluminium rising 8.6 per cent and 6.3 per cent respectively, supported by strong domestic demand and global supply concerns linked to the Iran conflict.
Friday’s steep decline pushed both benchmark indices into negative territory for the month. The Nifty ended May with a loss of 1.9 per cent, while the Sensex declined 2.8 per cent.
However, broader markets outperformed large-cap stocks despite the overall weakness. The Nifty Midcap and Smallcap indices registered gains amid optimism surrounding corporate earnings, highlighting continued investor interest in select growth segments even as benchmark indices remained under intense pressure.
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