Dalal Street in Turmoil: Sensex Plunges 2,500 Points in a Week – Should You Buy the Dip or Brace for More?

Key Facts: Indian equity benchmarks slumped sharply last week. The BSE Sensex gave up roughly 2,587 points (3.2%) and the Nifty 50 fell about 672 points (2.7%) over six trading days ^[1] ^[2]. This was the worst weekly decline in nearly six months, erasing about 90% of the recent rally from early September ^[3] ^[4]. Markets were roiled by external shocks: U.S. President Trump announced 100% tariffs on imported branded/pharma products and hiked H-1B visa fees to $100,000 per worker. These policy moves hit India’s tech and pharma stocks hard. Sectorally, IT was the biggest laggard (down ~8% on the week) and Pharma also plunged (over 8% in small-cap pharma names) ^[5] ^[6]. Mid- and small-cap indices underperformed as well. In all, about ₹16 lakh crore (₹16 trillion) of market capitalization was wiped out ^[7] ^[8].

Analysts say technical indicators now favor the bears. Nifty has decisively broken below its 100-day moving average and is nearing the critical 200-day level (~24,400), a break of which “will tighten [the bears’] grip further” ^[9] ^[10]. HDFC Securities’ Nagaraj Shetti warns that the recent breakdown of support around 24,900–25,000 is “not a good sign” and suggests more weakness ahead; he sees the next support only at 24,400–24,300 ^[11]. Similarly, Bank Nifty has erased over half its recent gains, with SBI Securities’ Sudeep Shah noting that if the index slips below 54,000, it could fall toward ~53,500 ^[12].

On the positive side, some experts argue valuations are now attractive. HSBC Global Research points out that Indian stocks have underperformed emerging markets by a record margin this fall – by about 32 percentage points since mid-September 2024 – but notes that “valuations have fallen…earnings are near the bottom and are set to improve,” making the market “attractive” ^[13]. HSBC even calls the current period “the favourable time” for foreign investors to return to India’s markets ^[14].

What Sparked the Sell-off: Last week’s slide was driven by a one-two punch of U.S. policy shocks. First, President Trump announced 100% tariffs on imports of patented and branded pharmaceutical products, effective October 1, unless companies shift production to the U.S. ^[15] ^[16]. India’s pharma exporters – whose largest market is the U.S. – saw major losses. Over 100 large-cap stocks fell more than 3%, led by pharma names (Wockhardt, Laurus, Neuland, Biocon, Zydus) down as much as 9% ^[17]. Analysts warn these tariffs “could significantly impact Indian pharmaceutical exporters,” since the U.S. accounts for ~35% of India’s pharma exports ^[18] ^[19]. One HDFC Securities researcher noted that India’s generic exporters may largely avoid direct harm, but companies making U.S.-branded drugs (like Sun Pharma via contract manufacturers) “may face measured impacts” ^[20].

Second, on the visas front, Trump signed an executive order hiking the H-1B work visa fee from $1,200 to $100,000 per visa ^[21] ^[22]. Since Indians hold about 70–71% of all H-1B visas ^[23] ^[24], this caught the Indian IT sector off guard. The NSE Nifty IT index plunged nearly 4% in one session as the news broke ^[25]. Analysts say the steep fee hike will “adversely impact financials of Indian IT companies” and dent their profit margins ^[26] ^[27]. In addition, Accenture’s weak growth outlook fed worries about global tech spending, contributing to an IT selloff (leading IT majors fell ~1–4% each) ^[28] ^[29].

Other factors compounded the rout. Foreign institutional investors (FIIs) have been net sellers for weeks, and renewed tariff fears plus the visa shock drove another wave of outflows. Upstox notes that “persistent foreign fund outflows” and revived U.S.–China trade tensions also weighed on sentiment ^[30]. Collectively, investors dumped riskier small- and mid-cap stocks: Nifty Smallcap 100 fell ~5.1% for the week, underperforming large caps, and midcaps shed ~2% ^[31] ^[32].

Sector and Stock Winners/Losers: In the downturn, banks and utilities held up relatively well, while IT and Pharma were smashed. On the Nifty 50, Tech Mahindra led the losers, down 9.4% on the week, and TCS fell 8.5% – its steepest weekly drop in over five years ^[33]. Wipro, Infosys, HCL Tech, and others similarly lost 6–8%. Mid-cap IT players like Coforge (-14.3%), Mphasis (-11.7%), and Persistent (-10.1%) fared even worse ^[34]. In Pharma, frontline firms fell 4–8% and specialty manufacturers saw double-digit slides. Consumer durables, media, and realty also tumbled (Nifty Realty –6.1%, Pharma –5.2%, Consumer Durables –4.6% for the week ^[35]).

By contrast, a handful of stocks bucked the trend. Maruti Suzuki (+2.7% for the week), Axis Bank (+1.6%), L&T (+1.5%) and Eicher Motors (+1.1%) were the few Nifty members that gained. Even those, however, barely budged relative to the big declines around them ^[36]. In small-caps, Hindustan Copper (+10.3%) and Anant Raj (+6.1%) were among rare winners, on company-specific news ^[37].

Technical Outlook & Expert Views: Market technicians say the chart picture is ominous. As one analysts puts it, the plunge has broken “crucial support” in the 25,000–24,900 range ^[38]. Nifty’s Relative Strength Index is falling (currently ~39) and the MACD has a bearish crossover ^[39]. Nifty is now ~250 points above its 200-day moving average (around 24,400) ^[40]. HDFC Securities’ Nagaraj Shetti believes if Nifty closes below 24,400–24,300, a further slide is likely ^[41]. Bank Nifty, too, is under pressure: SBI Securities’ Sudeep Shah warns that 54,100–54,000 is now crucial support, and a breach could send it toward 53,500 ^[42].

Nevertheless, not all commentary is bearish. Some strategists argue that the sharp sell-off has made valuations cheap. HSBC’s recent note points out that Indian stocks had built up a premium to peers, but that premium has now collapsed back to historical levels. With inflation moderating and policy easing on the horizon, HSBC expects earnings to improve and suggests this is a “favourable time” to buy the dip ^[43] ^[44]. They note foreign investors (largely sidelined for a year) may start returning, given the attractive valuations. Other brokers echo this cautious optimism: for example, some analysts advise focusing on strong, well-capitalized companies, expecting a rebound when the macro picture clarifies.

Global Context and Comparisons: Globally, stock markets were mixed. U.S. indices had a choppy week: the Dow and S&P 500 ended Friday slightly higher, but all three major U.S. indexes logged weekly losses (Dow –0.2%, S&P 500 –0.3%, Nasdaq –0.7% ^[45]). Traders there were also digesting Trump’s tariffs (including on U.S. pharma and heavy trucks) and nearby data. Notably, heavy-truck maker Paccar jumped on relief that U.S. manufacturing should be shielded by the new tariffs ^[46]. Indian markets, however, felt the pain more acutely due to the country’s large pharma export business and visa-dependent IT sector. In emerging markets, India’s equity slide was far steeper than most peers last week – the worst performer in Asia on Friday ^[47] ^[48].

In India’s own history, this sell-off is one of the sharper weekly drops in recent times. It mirrors, in intensity, the declines seen in mid-2024 and early-2025 when global shocks hit (e.g. Fed rate jitters, earlier geopolitical events). But unlike routine profit-taking, this downturn was driven by fresh policy shocks. Analysts compare it to past tariff or visa-related sell-offs (such as tech downgrades in 2023) but note it is unusually broad-based. The fact that it erased almost all of the gains since September 3 (post-GST news rally) highlights how tenuous the recovery was ^[49].

Should Investors Buy the Dip? This is the $1 lakh question. While long-term investors may view current levels as a buying opportunity, experts caution care. The technical damage suggests more volatility ahead. Advisors recommend “buy the dip” only selectively: in quality stocks with strong balance sheets, consistent cash flows and good governance – likely those that have already weathered the stress (e.g. blue-chip banks, consumer staples, select dividend-payers). In contrast, leverage-heavy mid/small-caps or heavily policy-dependent names (unsecured lenders, weak telecom companies, etc.) remain risky.

Quoting S&P Global data strategists (via Reuters): one said “it’s typical of quarter-end window dressing” and volatility may persist through October as companies report earnings ^[50]. U.S. analysts expect more volatility too, as Fed policy and data loom. In India, at least one silver lining is that the government exempted generic drugs from the full 100% tariff (lifting the tariff to 100% only on branded/patented drugs) – a move that should shield basic pharma producers from the worst impact ^[51].

Bottom Line: The late-September sell-off has shaken investor confidence. Key market support levels (Nifty 24,400, BankNifty 54,000) are under threat ^[52] ^[53]. Technical analysts warn of more downside if these breaks. Yet some strategists argue that the panic has overshot fundamentals: corporate earnings are still growing, and macro indicators (inflation, GDP) remain relatively benign. As HSBC notes, “earnings are near the bottom and are set to improve” once transient shocks fade ^[54]. In the very near term, however, markets are likely to remain volatile. Investors should stay informed and cautious – focus on high-quality names and avoid chasing penny stocks. If global cues or any domestic positive (e.g. better trade numbers, policy action, or a quick resolution of visa/tariff issues) kick in, a bounce is possible. But given the current technical and fundamental stress, “further weakness in the short term” cannot be ruled out ^[55].

Sources: Recent market analyses and commentary on the September 26, 2025 sell-off ^[56] ^[57] ^[58] ^[59], including expert quotes from HDFC Securities and HSBC ^[60] ^[61], and news on Trump’s tariffs and visa orders affecting Indian stocks ^[62] ^[63]. Reports by Moneycontrol, Upstox and Livemint were used, as well as Reuters market coverage ^[64], to compile the above analysis.