The BSE Sensex dropped 873 points, or 1.06%, to close at 81,186, while the NSE Nifty declined 261 points, or 1.05%, to end at 24,683.
Across sectors, Nifty Bank, Financial Services, Pharma, and FMCG slipped 1–1.5%, while Nifty Auto fell 2.2%. In the broader market, the Nifty Midcap100 lost 1.6%, and the Nifty Smallcap100 declined 0.94%.
The total market capitalisation of BSE-listed companies fell by Rs 5.13 lakh crore to Rs 438.54 lakh crore.
Here are key reasons behind the fall:
1. Moody’s Downgrades US Government Rating
Global sentiment turned cautious after Moody’s downgraded the US government’s credit rating from AAA to Aa1 over rising debt concerns. The move sent bond yields higher, with the 30-year Treasury yield touching 5.03%, its highest since November 2023. The rise in yields has raised fears of reduced liquidity in global markets, which often impacts emerging markets like India.
2. FIIs Turn Net Sellers
Foreign Institutional Investors (FIIs) have turned cautious, pulling out Rs 526 crore on May 19, while Domestic Institutional Investors (DIIs) were also net sellers to the tune of Rs 238 crore. This marked the first instance in over a month where both FIIs and DIIs offloaded shares simultaneously.Year-to-date, FIIs have been net sellers of Rs 1.09 lakh crore worth of Indian equities, while DIIs have purchased a net Rs 2.30 lakh crore, indicating a narrowing cushion from domestic flows.
3. Profit Booking After Recent Rally
The recent rally in Indian markets — which saw the Sensex and Nifty surge nearly 4% following the Operation Sindoor ceasefire — led to stretched valuations. In the past nine sessions, the market cap of BSE-listed firms jumped by Rs 27.3 lakh crore. Tuesday’s decline is partly attributed to investors booking profits at elevated levels.
“With the lack of major positive triggers and prevailing uncertainty over U.S. fiscal stability, investors opted for profit-booking and adopted a cautious stance. Selling pressure was widespread as participants awaited more clarity on the India-U.S. trade agreement. Given the current premium valuations and delays in the trade deal, we foresee a phase of short-term consolidation, which may lead FIIs to scale back their positions in the domestic market,” said Vinod Nair, Head of Research, Geojit Investments Limited.
4) Pressure from Heavyweight Stocks
Selling pressure in large-cap names dragged the indices lower. HDFC Bank, Reliance Industries, ICICI Bank, M&M, Maruti, and Bajaj Finance were among the top drags. Notably, shares of Eternal (formerly Zomato) fell over 4% amid concerns over a potential $1.3 billion outflow following the company’s move to become an Indian Owned and Controlled Company (IOCC).
According to Jefferies, Eternal may face MSCI exclusion due to foreign ownership nearing the regulatory limit of 46.5%. The stock currently has 44.8% foreign holding as of March, but analysts believe it may have risen closer to the threshold.
5) Signs of Deeper Pullback Emerge
The Nifty slipped after two days of consolidation as broad-based selling and weak market breadth weighed on sentiment. Analysts said a negative divergence on the daily RSI indicates the possibility of a deeper correction toward the 21-day EMA. If the index stays below 24,700, the decline may extend to 24,300, while a recovery above that level could trigger a fresh consolidation phase.
6) Rising Covid Cases
A spike in COVID-19 cases in parts of Asia — including Singapore, Hong Kong, China, and Thailand — has added to global caution. The surge, driven by the JN.1 variant, has led to higher hospitalisations and mortality in some regions.
Singapore reported around 14,200 COVID-19 cases in the week ending May 3, up from 11,100 the previous week, with hospitalisations rising by 30%. In Hong Kong, officials said the virus is at a “quite high” level, with the highest positivity rate in a year and 31 deaths recorded — the most in the past 12 months.
Two Sharp with ET: RIL’s ₹1.7B gas war with ONGC reaches SC, 800-point Sensex plunge shakes investors
Reliance moves Supreme Court over a ₹1.7 billion gas migration dispute with the Centre, reigniting its long legal war over the KG-D6 block. Meanwhile, Indian markets see a bloodbath—Sensex plunges 800+ points as Moody’s US Rating cut, FIIs exit, and profit booking hit hard. What’s next for RIL and Dalal Street? All of this in today’s episode of Two Sharp with ET.
According to officials quoted by PTI, India reported 257 active cases as of 19 May 2025. “As per the preliminary information available, the cases are mostly mild, not associated with unusual severity or mortality,” an official said. The central government is closely monitoring the developments and has increased health surveillance nationwide.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
