Stock Market Crash: Sensex Hits 27-Month Low, Nifty Falls To 6-Month Low; FIIs Exit $40 Billion In 2 Years

The Indian stock market has continued to topple severely, and the September 29th trading session is no different. The intensity of selloffs is such that the Sensex has touched its lowest level in 27 months, and the Nifty falls to hit its 6-month low. Beyond the geopolitical crisis, inflationary pressure, dollar strengthening, and monetary policy tightening scenario, what is difficult to comprehend is the outflow of foreign institutional investors (FIIs). As Sensex breaks below 72,100, FIIs have exited over $40 billion from the market. Will the trend continue?

Sensex At 27-Month Low

At the time of writing, the market has recovered some losing steam but is still in red. Theensex traded around 72,500 levels, driven by stocks like Adani Ports, Kotak Mahindra Bank, Tata Steel, Indigo, and Tech Mahindra. However, what could not be ignored is the intraday low of 72,064 a few minutes ago.

The last time Sensex touched below 72,100 mark was in 2024. Sensex is currently at its lowest level since June 2024. It had touched 72,079.05 on June 4, 2024.

Following the latest performance, Sensex has nosedived by 12,619.68 points or 14.81% year-to-date, on the path to mark its worst yearly performance in a decade. From its December 2025 all-time high of 86,159.02, Sensex has crashed by 14,095.02 or 16.4%.

"With Brent crude above $106 and the US 10-year at 5.23%, the global macro construct continues to be unfavourable for equity markets. The emerging macro scenario in the US appears to be one of high growth and high inflation. The massive AI spending is driving growth and better-than-expected growth will keep inflation elevated, warranting one more rate hike by the Fed. This, in turn, is pushing US bond yields higher," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Nifty is likely restrained from a deeper fall but still facing the brunt of intense bearish trend.

Nifty At 6-Months Low

Nifty is currently holding around 22,700 levels but in the early trade of Tuesday, the benchmark touched an intraday low of 22,569.65, marking its 6-month low.

The 50-scrip benchmark has crashed steeply by 3,430.35 points or 13.12% in 2026 so far. It has nosedived by 14.4% or 3,803.55 points from its all-time high of 26,373.20.

Explaining further, Vijayakumar said, since higher crude prices have not been passed on to consumers, the fiscal strain on India will be higher in FY27. Therefore, if crude prices remain elevated, the fiscal strain can impact India's GDP growth and corporate earnings growth for FY27. This concern, too, is weighing on the market.

Beyond the current status, one long-standing impact is brutal selloffs from FIIs.

FIIs Exit $40 Billion From Indian Stock Market

"Foreign institutional investor (FII) selling is adding to the pressure, while continued geopolitical uncertainty, particularly around the Middle East, is keeping investors cautious," said Sachin Gupta, VP - Research at Choice Broking.

Data from NSE and BSE shows that FIIs have been net sellers in the Indian stock market since 2021. FIIs' sell-offs first broke the Rs 3 lakh crore mark in 2024 and then simply multiplied in excess. In 2024, FIIs sold up to Rs 3,02,434.91 crore in Indian stocks, extending further to Rs 3,06,419.09 crore outflows in 2025. FIIs touched a record outflow of Rs 382,938.85 crore in less than 9 months of 2026, already eyeing the new threshold of Rs 4 lakh crore mark.

If FIIs outflow hits Rs 4 lakh crore mark in 2026, it will be for the first time ever.

Even foreign portfolio investors (FPIs) have followed a selling trend this month. Geojit expert explained that the trend of FPI flows turning negative after positive inflows in July and August was evident early this month. This trend has been sustained, and the total equity outflows through exchanges have touched Rs 25,682 crores this month through 25th August. Also, the trend of FPI investment through the primary market continues with total investment of Rs 8,551 crores up to the 25th of this month.

This trend of selling through the exchanges and investing through the primary market has taken the total FPI selling this year through exchanges to Rs 295,971 crores and the total investment through the primary market during this period to Rs 54,398 crores.

Given the high US bond yields and better returns from India's IPO market, he said, "This trend is likely to continue." Yet another significant trend in FPI investment is that even though they are sellers in large caps, they have been sustained buyers in mid-and-small caps. FPIs also are chasing the market momentum.

However, over the past 2 years, FIIs have exited up to $40 billion from the Indian stock market, raising the question whether global investors have lost faith.

According to Bernstein data, FIIs invested only $4 billion in the 10-year performance, which is overpowered by their outflows. In fact, in the past 24 months, FIIs' combined outflow stood at $56.3 billion compared to the combined inflow of $38.6 billion in the previous 24-month period.

In Bernstein's opinion, the historical relations between India's economic growth and foreign investment have weakened. It explained that till 2007, the relation between India's macroeconomic strength, GDP growth, and foreign inflows moved closely together before going haywire. The relation further weakened over time until the correlation turned negative.

Another reason is the higher valuation of Indian markets against other emerging counterparts, which pushed FII outflow after 2020. The average relative valuations rose to 162% for Indian markets in the latest period, while FIIs exited $44 billion.

What could bring back FIIs? Bernstein believes in temporary improvements in crude oil prices along with broader macroeconomic conditions and steady healthy earnings growth. However, the global broker also pointed out that for sustained FIIs inflow, India will need to develop competitive businesses on a global level, more specifically in segments like semiconductors, batteries and energy storage, space and defence and deep-tech.

Disclaimer: The views and recommendations expressed are solely those of the individual analysts or entities and do not reflect the views of Goodreturns.in or Greynium Information Technologies Private Limited (together referred as "we"). We do not guarantee, endorse or take responsibility for the accuracy, completeness or reliability of any content, nor do we provide any investment advice or solicit the purchase or sale of securities. All information is provided for informational and educational purposes only and should be independently verified from licensed financial advisors before making any investment decisions.