Markets closed significantly lower on Friday, experiencing a near 300-point drop in the last 30 minutes of trading that negated most of the day’s earlier gains. This decline was largely attributed to MSCI’s May 2026 index rebalancing, which resulted in an estimated $800 million to $1 billion in passive foreign outflows from Indian equities.
“The pressure intensified during the final hours of trade after the MSCI Global Standard Index rebalancing took effect, triggering heightened volatility in select stocks amidst anticipated passive fund flow adjustments,” commented Siddhartha Khemka of Motilal Oswal Financial Services.
The Sensex fell 1,092 points or 1.44 percent, closing at 74,775, while the Nifty 50 dropped 359 points or 1.50 percent to end at 23,547. The cash turnover on the NSE more than doubled compared to the previous session, primarily driven by trades related to the rebalancing. On a weekly basis, the Nifty recorded a loss of 0.72 percent. Changes in the MSCI Standard Index included the addition of Federal Bank, MCX, NALCO, and Indian Bank, while Rail Vikas Nigam, Kalyan Jewellers, Jubilant FoodWorks, and Hyundai Motor India were removed.
Early in the trading session, markets had opened positively on reports of a preliminary agreement between the United States and Iran to extend their ceasefire by 60 days and ease shipping restrictions in the Strait of Hormuz. The Nifty briefly peaked at 24,002, but selling pressure at that psychological threshold precipitated a reversal. Major declines were noted in Reliance Industries, down over 1.6 percent, and ITC, down over 3 percent, alongside weakness among banking giants HDFC Bank and ICICI Bank. Except for the Nifty IT index, all sectoral indices closed in the negative, with Oil & Gas, Metals, and Auto sectors leading the losses. The Midcap 100 index fell by 1.33 percent, and the Smallcap 100 drooped by 0.85 percent.
Conversely, the IT sector emerged as a lone bright spot, gaining over 2 percent, buoyed by overnight advances in U.S. technology stocks and a weaker rupee. TCS attracted attention after it denied reports alleging the loss of a major client contract in Canada, providing additional support to the sector.
On the macroeconomic front, the Indian Meteorological Department’s downward revision of the 2026 southwest monsoon forecast to 90 percent of the Long Period Average, down from an initial estimate of 92 percent, raised concerns among investors about food inflation due to potential El Niño effects. “The prospect of deficient rainfall heightens fears of elevated food inflation in the coming months,” stated Vinod Nair of Geojit Investments.
In currency markets, the rupee appreciated 69 paise to close below 95.20 against the dollar, marking its strongest single-day gain since April 2, aided by a decline in crude oil prices, which fell over 1.5 percent to below $88 per barrel. Crude prices have now dropped over 17 percent in May. MCX Gold fell by approximately ₹950 to ₹1,55,975, while COMEX gold edged up to near $4,526.
Looking ahead, markets are anticipated to remain range-bound, with investors keeping a close eye on the RBI Monetary Policy Committee meeting scheduled for June 3–5, where it is widely expected that the repo rate will be maintained at 5.25 percent. Further developments regarding U.S.–Iran negotiations and crude oil price movements are also being monitored. “As long as the Nifty trades below the 50-day SMA of 23,700, weak sentiment is likely to continue,” cautioned Amol Athawale of Kotak Securities, flagging 23,300–23,000 as the next support band on the downside.
Published on May 29, 2026.
