Sensex, Nifty: Why stock market fell sharply today; what's ahead?

Nifty is trading at 21.5 times its one-year forward earnings, which is above its historical average of 20.4 times. India is being perceived as relatively expensive market compared with other emerging market peers.

The BSE Sensex dropped about 1,600 points from day's high, while the NSE Nifty looked poised to test the sub-25,000 level in a brisk selling on Friday afternoon amid fears Israel was planning a significant retaliation following Iran's missile attacks, widening the scope of the Middle East war. Sharp foreign outflows in October due to unattractive valuations and concerns over Brent crude oil prices that topped $78 a barrel level hurt sentiment, as investors chose to take some profit off the table amid geopolitical uncertainty.