Broad Market Sell-Off
Recent trading sessions witnessed a widespread decline across the Indian stock market, driven by negative global sentiment. This selling pressure was particularly
pronounced in high-volatility and growth-oriented sectors. The information technology (IT) sector bore a significant brunt, experiencing sharp drops due to apprehensions surrounding artificial intelligence (AI) advancements and a general downturn in global technology stocks, which heavily impacted major index components. Simultaneously, the metals and mining industries faced considerable losses, reflecting a global softening of commodity prices and growing concerns about demand trends originating from China. The energy sector also saw a dip amidst fluctuating crude oil prices, while sectors like consumer goods, automobiles, banking, and financial services experienced consistent profit-taking as investors moved towards a risk-averse stance. The Nifty 50 index concluded Friday's trading 336 points lower at 25,471, the BSE Sensex fell 1,048 points to 82,626, and the Bank Nifty index declined by 553 points, closing at 60,186.
AI Fears Drive Correction
Market professionals attribute the recent sell-off to renewed anxieties about economic slowdowns, amplified by persistent inflation in the US and other major economies. Should these inflationary pressures exacerbate, impacting consumer demand and job creation, or worse, leading to job losses, the market anticipates further crashes, mirroring potential downturns in the US market. The tech-heavy Nasdaq index, for instance, has already seen a correction of approximately 5.50% from its recent peak of 23,857. Experts believe that any significant further decline in the Nasdaq, especially in double-digit percentages, will inevitably exert downward pressure on Indian stock indices. This sustained weakness in the Nasdaq could potentially pull the BSE Sensex down to the 60,000 mark and the Nifty 50 index to around 18,000 by the close of the fiscal year 2026-27.
Investor Vigilance Advised
Market analysts are urging investors to take the recent broad-based stock market decline seriously, emphasizing that it was triggered by an external factor: AI disruption fears. This concern has fueled sharp sell-offs in prominent US tech stocks like NVIDIA, Apple, Alphabet, Meta, and Microsoft. Following intensified selling, the Nasdaq has retreated 5.50% from its one-month high of 23,857. Indian investors are advised to closely monitor the performance of the Nasdaq. According to Amit Goel, Chief Global Strategist at PACE 360, a robust and sustainable rebound in the Nasdaq in the coming week is crucial. He cautions against a 'dead-cat bounce,' which signifies a weak recovery that fails to regain prior gains, indicating underlying weakness rather than a genuine market resurgence.
US Slowdown's Global Reach
Amit Goel further elaborates that if the Nasdaq fails to recover its recent losses, this could reignite fears of an economic slowdown in the US. Such a scenario would likely intensify selling pressure on Wall Street, and consequently, other global markets, including India's Nifty 50, Sensex, and Bank Nifty, would find it difficult to remain unaffected by the US stock market crash. Anuj Gupta, a SEBI-registered market expert, concurs, noting that indicators of an economic slowdown, such as inflation risks, declining demand, lower corporate earnings, and job insecurity, are already prevalent in the US economy. He points to a recent rise in US inflation to 2.40% in January 2026 and the ongoing struggle by the US Federal Reserve to bring inflation back to its 2% target. Despite headline employment growth, US workers face challenges with high living costs and limited wage increases, contributing to job insecurity.
Economic Indicators Signal Downturn
Anuj Gupta highlights a recent BBC report indicating that job openings and hiring rates in the US have reached multi-year lows, sparking concerns about the broader economic health. Although there is no definitive evidence of a significant economic downturn yet, Goldman Sachs reported in October 2025 that America might be entering a period of 'jobless growth,' where new technologies and AI enable companies to operate with fewer employees. This concept suggests that economic expansion could occur without a corresponding increase in employment. This economic climate in the US poses a significant risk factor for global markets, including India.
Projected Indian Market Impact
Amit Goel predicts that a 'dead-cat bounce' in the US market in the near future would signal an impending slowdown, with its impact becoming evident in the US stock market by the third quarter of the current year and persisting for at least two years. In India, this US slowdown could begin to affect markets from the start of October 2026, especially if IT stocks fail to recover their recent losses. Indian IT stocks have been under pressure for the last four years since their peak before the Russia-Ukraine war in February 2022, but the current sell-off driven by AI fears is particularly concerning as it has intensified selling in sectors previously considered defensive. Goel forecasts a potential 30% correction in Indian indices from current levels by the end of FY 2026-27, potentially bringing the BSE Sensex to around 60,000 and the Nifty 50 to 18,000 by March 2028. Amol Athawale from Kotak Securities notes that the intraday market texture remains weak, with potential declines to 25,300/82,200 if key support levels are breached, while immediate resistance is seen at 25,600/83,100.
