Before recovering some of the losses, Sensex declined nearly 660 points to 73,450, while Nifty 50 dropped 204 points (nearly 0.9%) to 22,764 on Tuesday morning after opening. The sharp decline wiped off more than Rs 3.5 lakh crore from the total market capitalisation of all companies listed on BSE, dragging it down to Rs 424 lakh crore.
IndiGo, Zomato-parent Eternal, Mahindra & Mahindra (M&M), State Bank of India (SBI), Axis Bank and Asian Paints were among the top losers on Sensex, declining around 2-3%. Bucking the trend, Bajaj Finance, TechMahindra, HCL Tech and ITC shares were trading in the green, but with only marginal gains.
Nifty Auto led losses among the sectoral indices on NSE, falling more than 2% in the early trading hours, while Nifty PSU Bank index declined 1.9%. Nifty Metal meanwhile gained 0.7%, even as India Vix jumped 2%. Around 1,105 stocks declined on NSE, while 1,398 advanced and 82 remained unchanged.
Here are the 5 key factors pushing markets down today:
1) Trump’s fresh threats on Iran
US President Donald Trump ramped up his threats against Iran, while postponing his plan to unleash “hell” on Tehran for still not completely opening the Strait of Hormuz. He warned that “the entire country of Iran ” could be taken out in one night and that night might be tomorrow night” if Tehran failed to comply.
“Every power plant in Iran will be out of business, burning, exploding and never to be used again,” Trump said, adding that bridges could face “complete demolition by 12 o’clock… over a period of four hours – if we wanted to.” Iran has dismissed the remarks. Meanwhile, fresh Israeli airstrikes were reported in Iran, followed with retaliatory missile fire as the war continues to show no sign of resolution. Stock markets had rallied yesterday after a report said that Iran and US have received a plan to end their conflict, which can take effect as soon as Monday and lead to the resumption of trade through the Strait of Hormuz. The framework comprising a two-tier approach with an immediate ceasefire followed by a comprehensive agreement was put together by Pakistan, it added.
This came after Trump during the weekend claimed that the US will massively escalate its strikes on Tuesday in case Iran doesn’t open the Strait of Hormuz, the critical waterway for the passage of oil and other trade. In a strongly-worded post on Truth Social, the US President wrote, “Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran. There will be nothing like it!!! Open the F****n’ Strait, you crazy bastards, or you’ll be living in Hell – JUST WATCH! Praise be to Allah.”
2) Oil prices back above $110/barrel
After a brief pause in their record rally yesterday, oil prices soared back above the $110 per barrel mark as Trump’s fresh threats of military strikes on Iran and prolonged disruption of trade through the Strait of Hormuz continued to raise worries over supply disruption.
Brent crude futures gained around 1.4% to trade at $111 per barrel, while WTI Crude futures gained nearly 3% to $115 per barrel, as seen at 9 am IST on Tuesday.
Oil prices have seen a skyrocketing rally since the outbreak of the war at the end of February this year. Oil prices crossed the crucial $100 mark in March after the closure of the Strait of Hormuz, marking the first time since Russia’s invasion of Ukraine in 2022, and have sustained over that level since then.
3) Bond yields rise
The yield on benchmark US 10-year notes rose slightly to 4.349% from 4.346%, while the 30-year bond yield increased to 4.907%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose to 3.862%.
Rising bond yields typically are considered to redirect global capital flows away from Indian equities.
4) FII selling streak continues
The massive selling streak of foreign investors continues to weigh on investor sentiment. FIIs remained net sellers of Indian equities for the 24th consecutive session, selling shares worth nearly Rs 8,167 crore on Monday, according to data on NSE. While this does not reflect today’s activity, sustained outflows in recent sessions have weighed on investor sentiment, even as domestic institutional investors remain net buyers.
5) Profit booking
Today’s decline in stock markets may have also been driven by profit booking after three days of sharp gains. Sensex and Nifty surged around 3% during the three-day gaining streak as rupee strengthened, and hopes for de-escalation in the raging Iran-US war emerged.
However, the underlying worries remain heightened, which may have led investors to resort to profit booking today.
Despite the return of the bears, few positive tailwinds can be seen in the markets. Rupee rose 0.06% to open at 93.0025 against the US dollar, as against the previous close of 93.06. The Indian currency recently saw a massive decline, breaching the key psychological mark of 95 last week amid the raging Iran-US war. However, it has recovered some losses since RBI last week stepped up its efforts to support the currency by barring banks from offering rupee non-deliverable forwards to resident and non-resident clients and preventing companies from rebooking cancelled forward contracts.
Rupee’s rise largely reflects a technical pullback and RBI-driven stability, rather than a structural reversal in trend, warned Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities. “Despite the bounce, underlying pressures from crude prices and global uncertainty continue to persist,” he said, adding that the currency’s support is seen in the 92.45 zone in the near term, while resistance is placed near 93.75–94.
Global markets remained mixed, with Japan’s Nikkei dropping 0.18%. South Korea’s Kospi gained 0.20%, led by strong earnings from heavyweight Samsung. Wall Street ended yesterday’s session higher. The Dow Jones Industrial Average rose 0.36%, S&P 500 rose 0.44% and the Nasdaq Composite rose 0.54%. However, Dow Jones futures are currently down 0.15%.
Technical view
Nifty yesterday formed a bullish candlestick pattern with a higher high and a higher low, said Bajaj Broking, which warned that volatility is expected to remain elevated in the near term, driven by geopolitical tensions and firm crude oil prices, which continue to weigh on overall market sentiment.
“Going ahead, a follow through strength above Monday’s high 23,000 will open further upside towards 23,450 levels in the coming sessions. Failure to move above last week high will signal some consolidation in the range of 22,200-23,000 levels. While a breach below last week panic low of 22,182 will open further downside towards the key support area of 22,000-21,800,” it said.
The domestic brokerage placed key short-term support at 22,000–21,800 zone, which is the trendline support joining last 2-year lows and the 200 weeks EMA. “For any meaningful pause in the ongoing downtrend, the index needs to form a sequence of higher highs and higher lows on the daily chart, along with a sustained close above 23,465,” it added.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)