The Indian equity markets experienced a notable decline on Thursday, with the Sensex dropping 450.09 points or 0.53 percent to settle at 84,547.05, while the broader Nifty fell by 153.05 points or 0.59 percent, nearing the 25,900 mark. Investor sentiment was significantly impacted by the uncertainty surrounding the US Federal Reserve's future rate actions, particularly after Fed Chair Jerome Powell indicated that further interest rate cuts were unlikely in the near term. This cautious stance, coupled with fresh foreign fund outflows, created a challenging environment for the markets.

Key stocks that contributed to the decline included Dr. Reddy's Laboratories, HDFC Life Insurance Company, Sun Pharmaceutical Industries, Bharti Airtel, and Tata Steel, all of which saw declines of up to 5 percent. The market's downturn was further exacerbated by the announcement that foreign institutional investors (FIIs) sold shares worth Rs 2,540.16 crore on Wednesday. According to Ross Maxwell, Global Strategy Lead at VT Markets, Powell's remarks about the potential for increased volatility in equities and higher bond yields added to the market's nervousness, as investors grappled with the implications of a prolonged US government shutdown and its effects on economic data.

As volatility surged, indicated by a 1.5 percent rise in the India VIX to 12.16, market analysts are keeping a close eye on technical indicators. Anand James, Chief Market Strategist at Geojit Financial Services, highlighted that while Nifty showed signs of slowing momentum near recent peaks, buying interest could be expected on dips towards 25,990, with immediate support located around 25,886. This backdrop of caution and market adjustment underscores the complexities investors face amid global economic uncertainties and shifting monetary policies.