Why Did the Market Crash Today? 6 Key Reasons Behind the Sell-Off

SYNOPSIS: Indian markets declined sharply amid rising geopolitical tensions, broad-based sectoral selling, profit booking, Fed policy uncertainty, firm crude prices, and lack of fresh triggers, dampening investor sentiment.

Just when it feels like the market is finally finding its footing, when portfolios start showing small signs of recovery and confidence slowly comes back in, another sharp selloff hits. Lately, every attempt at a rebound seems to be followed by sudden volatility, often triggered by global headlines and geopolitical noise. While market swings aren’t new, the repeated pullbacks are leaving many investors feeling frustrated and demotivated.

Yet again, on Thursday, 19th February, the Indian stock market witnessed another sharp intraday decline. Nearly Rs. 4 lakh crore was wiped off investor wealth as the total market capitalisation of BSE-listed companies fell to around Rs. 468 lakh crore, down from Rs. 472 lakh crore in the previous session. The selling pressure wasn’t limited to frontline stocks – mid- and small-cap indices also faced broad-based weakness.

The Benchmark Indices were trading in negative territory throughout the session, with the Sensex decreasing by 1,470 points, or 1.75 percent, touching an intraday low of 82,264.2. Similarly, the Nifty 50 index declined by 430.6 points, equivalent to a fall of 1.66 percent, to the day’s low at 25,388.75. The sharp fall has once again raised the question: What exactly triggered this sudden slide? Here are the 6 possible key factors that may have contributed to Thursday’s market decline:

I. Rising Geopolitical Tensions: Fresh Concerns Around US-Iran

One of the biggest triggers behind Thursday’s market slide appears to be rising geopolitical tensions, with concerns growing around the uncertainty of a possible escalation between the United States and Iran, especially as nuclear negotiations between the two nations remain unresolved.

Reports suggesting the possibility of US military intervention in Iran, along with temporary disruptions in parts of the strategically crucial Strait of Hormuz, intensified market anxiety. Since a significant portion of the world’s oil supply passes through this route, any instability there tends to immediately impact investor sentiment.

Adding to the unease, Iran and Russia were scheduled to conduct joint naval drills in the Sea of Oman and the northern Indian Ocean on the same day. At the same time, the Ukraine-Russia peace talks in Geneva failed to produce any meaningful breakthrough, further intensifying the situation.

II. Crude Oil Prices Stay Elevated

Geopolitical tensions are also spilling over into the commodity markets. Crude oil prices remained firm after a sharp rally in the previous session, as investors priced in potential supply disruptions amid fears of escalating US-Iran tensions. Brent crude hovered around $70.31 per barrel after jumping over 4 percent in the previous session, while US crude held near $65.10, retaining most of its earlier gains. Rising oil prices are a concern for India, which is a major oil importer.

III. Selling Across Key Sectors

The weakness wasn’t driven by geopolitics alone. Selling pressure was visible across multiple sectors, including banking, financial services, energy, and capital goods, indicating a broader risk-off sentiment.

Market heavyweights, including Reliance Industries, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Larsen & Toubro, traded in negative territory, placing considerable pressure on the benchmark indices. Along with declines in Bharti Airtel, ITC, and Axis Bank, these stocks together contributed to nearly 70 percent of the Sensex’s total fall. While a few counters like Infosys managed marginal gains, the support was too limited to offset the broader weakness.

IV. Profit Booking after Recent Gains

Another fairly predictable factor behind the decline was profit booking. After a period of recovery and short-term rallies, some investors chose to lock in gains at higher levels. Profit booking is a normal market behaviour; investors sell stocks to secure returns when prices have risen.

However, once this selling momentum builds, it can trigger additional technical and algorithmic selling, particularly if key support levels are breached. As more traders exit positions to protect profits or limit losses, intraday declines can accelerate, adding to overall market pressure.

V. Mixed Signals from the US Federal Reserve

Another overhang on sentiment came from the latest US Fed meeting. The discussion revealed a divided stance within the committee. While some policymakers indicated openness to rate cuts if inflation continues to cool, others signalled readiness to tighten policy further if price pressures persist.

For markets in India, this mixed messaging creates uncertainty, as any delay in rate cuts (or worse, the possibility of another hike) could strengthen the USD. A stronger dollar typically puts pressure on emerging markets by slowing foreign inflows. This is particularly sensitive right now, as FIIs have only recently returned to Indian equities in February after several months of persistent outflows. In such an environment, global liquidity conditions matter significantly.

VI. Absence of Immediate Positive Triggers

Lastly, markets appear to be struggling due to a lack of strong near-term catalysts. While the broader outlook for CY26 remains constructive, supported by expected earnings growth and a stable macroeconomic environment, there are no immediate triggers to drive a sustained rally.

Valuations also play a role. Large-cap stocks have corrected to relatively reasonable levels, but mid- and small-cap segments continue to trade at elevated multiples. According to analysts at Geojit Investments, the Nifty is currently trading at around 20 times FY27 estimated earnings, while the NSE midcap and small-cap indices are valued at around 28 and 24 times FY27 earnings, respectively. In such a scenario, the market becomes more selective, favouring stock-specific opportunities rather than broad-based rallies.

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