The benchmark Sensex plummeted nearly 1,300 points and devoured more than ₹3.57 trillion of investor wealth as investors dumped stocks ahead of a feared clampdown on derivative trades by the Securities and Exchange Board of India (Sebi)

Rising geopolitical tensions in West Asia and apprehensions over the stimulus measures by China also caused the crash.

The BSE Sensex nosedived 1272.07 points or 1.49 per cent to end at 84299.78 after tanking 1314.71 points or 1.53 per cent to a day’s low of 84257.14.

On the NSE, the Nifty fell 368.10 points to 25810.85.

Analysts said the markets were expected to move into a consolidation phase in the near-term. Domestic investors are also likely counter any massive selling by foreign portfolio investors.

“We are now on a long-term bull market for India. And I see the Sensex going up to 100,000 probably by the end of the year provided that the measures taken by Sebi do not put a big damper on the market, that’s something that we have to watch,” emerging market investor Mark Mobius said.

The trend in the broader markets was mixed with the BSE midcap index falling 0.28 per cent and the smallcap index ending with gains of 0.07 per cent.

Market experts attributed various reasons to the Red Monday that was led by the large caps. Amid concerns over lofty valuations, other factors have rattled investors, including the upcoming Sebi board meeting. The meeting is expected to introduce stricter regulations for futures and options trading, potentially reducing market volumes.

Another worry is that foreign portfolio investors (FPIs) may favour China over India following Beijing’s recent stimulus package, potentially shifting investments eastward.

“One significant factor that is influencing foreign portfolios is the outperformance of the Chinese stocks which is reflected in the massive surge in the Hang Seng index by around 18 per cent in September,” V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, said.

“This surge has been triggered by hopes of revival in the Chinese economy in response to the monetary and fiscal stimulus announced by the Chinese authorities. The cheap valuations of Chinese stocks are keeping the momentum intact. This can prove to be a tactical trade which can sustain for some more time. This means FIIs may continue to sell in India and move some more money to better performing markets.’’

Rising geopolitical tensions with Israel hitting more targets in Lebanon also contributed to the subdued sentiment. Stocks also came under pressure because of the weakness in the Japanese markets.

The Nikkei slumped 4.80 per cent after the ruling party appointed Shigeru Ishiba, considered a monetary policy hawk, as the new Prime Minister. His appointment led to an appreciation in the yen.