Investor Risk Aversion Triggers Sharp Selloff in Indian Equities

Equity markets across Asia faced considerable headwinds on Tuesday as broader concerns about trade policies and currency weakness prompted investors to reassess their portfolios. India’s stock benchmarks extended their recent downward trajectory, with the BSE Sensex slipping 533.50 points—or 0.63 percent—to settle at 84,679.86. The NSE Nifty 50 index similarly retreated, shedding 167.20 points or 0.64 percent to close at 25,860.10.

The Indian rupee remained under pressure for the fourth consecutive session, breaching the 91-per-dollar threshold for the first time as persistent foreign portfolio outflows continued to weigh on the currency. This depreciation reflected the cautious sentiment pervading markets, even as the government advanced legislative measures to increase foreign direct investment in the insurance sector to 100 percent.

Weakness was broadly distributed across sectors. Among major decliners, banking heavyweight Axis Bank tumbled approximately 5 percent, while materials and industrials suffered notable losses. UltraTech Cement, Tata Steel, Bajaj FinServ, and HCL Technologies each declined around 2 percent. The BSE mid-cap and small-cap indexes fell 0.8 percent and 0.7 percent respectively, indicating that selling pressure extended beyond large-cap names. Market internals painted a subdued picture, with 2,523 declining shares overwhelmingly outnumbering 1,653 advancing shares.

Global markets provided little support for risk appetite. Across Asia and Europe, equity benchmarks declined in subdued trading as participants braced for crucial U.S. nonfarm payroll and inflation readings. Precious metals retreated after gold had surged to a seven-week peak in prior sessions, while oil prices extended losses from the previous day, slipping more than 1 percent on mounting supply expectations for 2026.

The broader narrative centered on U.S. monetary policy signals. The dollar remained steady near recent lows as market participants factored in expectations for two Federal Reserve rate cuts in the coming year. Meanwhile, optimism surrounding Ukraine peace negotiations provided some counterweight to negative sentiment, following President Trump’s claims of accelerated progress in diplomatic discussions.

Investor risk aversion—triggered by policy uncertainty and currency headwinds—will likely persist until clearer signals emerge from U.S. economic data.