Why the Indian Stock Market Tumbled in the Last 2 Days: Key Reasons to Know
The Indian stock market witnessed a sharp decline over the past two trading sessions, leaving investors anxious and analysts scrambling to decode the reasons. The benchmark indices — Sensex and Nifty — saw steep falls, with the Sensex crashing by over 1,300 points intraday on June 13 and Nifty slipping below crucial support levels.
So, what caused this sudden downturn? Here’s a comprehensive look at the key factors that triggered this correction.
1. Geopolitical Tensions: Israel-Iran Conflict
Global markets, including India, were rattled after Israel reportedly launched airstrikes on Iran’s nuclear facilities on June 13. This unexpected escalation in Middle East tensions raised concerns about a broader regional conflict, disrupting global investor sentiment.
India, heavily dependent on oil imports, is particularly sensitive to any instability in the Middle East. The possibility of supply chain disruptions and increased geopolitical risk premiums prompted investors to seek safe-haven assets and steer clear of equities.
2. Surging Crude Oil Prices
Brent crude prices spiked past $78 per barrel following the Israel-Iran strikes. For India, this is especially worrying:
- The country imports nearly 85% of its crude oil needs.
- Rising oil prices translate into higher import bills, which in turn weaken the rupee.
- Inflationary pressures are increasing, which could prompt the RBI to remain hawkish on interest rates.
- Higher fuel costs squeeze corporate margins, especially for sectors like aviation, logistics, and paints.
This oil price surge added to the already cautious market mood.
3. Global Risk-Off Sentiment
Geopolitical tension wasn’t the only global concern. Uncertainty surrounding U.S.–China trade relations, lingering inflation in major economies, and a more cautious outlook from central banks, such as the U.S. Federal Reserve, also added to global investor anxiety.
Global funds began offloading risk assets, and emerging markets, such as India, experienced capital outflows as part of this broader risk-off strategy.
4. Foreign Institutional Investors (FII) Selling
Foreign Institutional Investors (FIIs) have been net sellers in the Indian equity market for much of 2025. This trend intensified over the last few days, further weakening market sentiment. With global uncertainty and stretched valuations, foreign investors pulled out money from Indian equities, particularly large-cap and IT stocks.
Their exit amplified the decline, triggering further sell-offs across sectors.
5. Profit Booking and Technical Correction
After touching record highs in early June, the Indian markets were already ripe for a short-term correction. Traders used the geopolitical trigger as an opportunity to book profits.
Technical indicators also showed overbought conditions in several sectors. Once key support levels were breached, automated selling and panic-driven trades dragged the indices further down.
6. Midcap and Small-cap Volatility
Not just large caps — even midcaps and small-caps witnessed heavy losses. These segments are generally more volatile and sensitive to investor sentiment. As fear gripped the market, retail investors exited mid and small-cap stocks en masse, deepening the sell-off.
What’s Next? Should You Worry?
While the decline has been sharp, experts suggest that this may be a healthy correction, rather than the start of a prolonged bear market. Here’s what investors should watch now:
- Middle East developments: Any signs of escalation or de-escalation will have a direct impact on market sentiment.
- Oil price trend: A pullback in crude prices could ease pressure on Indian markets.
- RBI stance: If inflation remains in control, the RBI may maintain its growth-supportive monetary stance.
- Q2 corporate earnings: Strong earnings can renew investor confidence and stabilize the market.
Conclusion
The Indian stock market’s slide over the last two days is a result of a perfect storm: geopolitical fears, rising oil prices, global uncertainty, and profit booking. While the short-term outlook may remain choppy, long-term investors with a diversified portfolio and a calm approach may find this dip a good opportunity to reassess and realign.
Stay informed. Stay patient. Invest wisely.