At 11:30 am, the Sensex tumbled over 1,200 pts, to drop below 80,100; meanwhile, Nifty traded below the 24,850 level.
At the open, Sensex plunged 2,743 points to start the day at 78,543, while the Nifty 50 plunged 519 points to open at 24,659. The sharp decline wiped off more than Rs 7.8 lakh crore from the total market capitalisation of all companies listed on the BSE at open.IndiGo, Larsen & Toubro (L&T), Eternal, Adani Ports, and Asian Paints were among the top losers on Sensex, falling in the range of 2-4%. Bharat Electronics shares were the only gainers, rising a little more than 1% as rising geopolitical tensions boosted investor sentiment for defence stocks.
Nifty Realty was the top loser among the sectoral indices on NSE, falling around 2%, while Nifty Auto, Nifty IT, Nifty PSU Bank, Nifty Consumer Durables, and Nifty Oil & Gas declined more than 1% each.
Here are some of the key factors pushing markets down today.
1) War in the Middle East escalates
The war in the Middle East continued to escalate after the death of Iran’s supreme leader, Ayatollah Ali Khamenei. The 86-year-old leader was killed during the weekend, allegedly through missile attacks by the US and Israel. Four members of his family, including his daughter and a grandchild, were also killed.
What followed was a series of retaliatory attacks by Iran across major areas of the Middle East, leading to widespread hostilities in the oil-rich area of the Middle East.
“The uncertainty related to the war in West Asia will loom large over the market in the near-term,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. Kranthi Bathini of Wealth Mills Securities, meanwhile, said that nobody expected the expanding tensions in the Middle East, especially in the UAE. So this will bear a negative impact on the financial markets in the short-to-medium term.
2) Crude oil prices surge
Crude oil prices surged, with Brent crude prices jumping 6% to trade at $77.08 per barrel and WTI Crude rising 5.5% to $70.71 per barrel, as seen at 9.30 am. More than 20% of the world’s oil passes through the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The heavy missile strikes around the area have raised worries about supply constraints, leading to a spike in oil prices.
UK’s second largest bank, Barclays, on Saturday increased its forecast for Brent Crude oil futures to $100 per barrel. “Oil markets might have to face their worst fears on Monday. As things stand right now, we think Brent could hit $100 (per barrel), as the market grapples with the threat of a potential supply disruption amid a spiraling security situation in the Middle East,” the bank said in its report.
3) Rupee declines
Indian rupee weakened sharply, crossing the key $91 mark against the US dollar for the first time in one month after the rising hostilities between Iran and Israel-US lowered risk-on sentiment and triggered a massive rally on oil prices.
“It is fair to assume that the rupee will open weak, most likely closer to Rs 91.50 per dollar. But RBI will also be present in the market to prevent a sharp fall so one can expect the rupee in a way not to weaken below Rs 92 per dollar,” said Anshul Chandak, head of treasury at RBL Bank.
4) Strong FII selling dampens sentiment
Foreign investors remained sellers during the last session, net selling Indian equities worth Rs 7,536 crore on Friday, according to data on NSE. While this doesn’t reflect on their trading behaviour for today’s session, strong FII selling dampens sentiment.
Domestic investors however remained buyers, net purchasing Indian equities worth Rs 12,293 crore during the last trading session.
What should investors do?
As panic rises on Dalal Street, experts advise patience. “Experience tells us that panic selling during a crisis is the wrong strategy,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. He advised investors to refrain from selling and watch how things evolve.
“Data from crises during the last many decades tells us that an event like the present crisis will not have any impact on the market six months later. This is the takeaway from the market behaviour after the recent crises like the Covid crisis, Russia-Ukraine war and the Gaza conflict. The ongoing West Asian crisis is unlikely to be different. However, since a war can spring unexpected surprises, investors have to be cautious,” he said.
Weakness in the market can be used to slowly accumulate high quality stocks in domestic consumption themes like banking, automobiles, capital goods and defense, according to the analyst.
Key levels to watch out for
The market has decisively broken the crucial support level (200 days SMA) of 25,300 and closed below it in the previous session, indicating weakness in the broader market sentiment, said Shrikant Chouhan, Head Equity Research, Kotak Securities. “The immediate level to watch is 25,000. A sustained move below this mark could increase pressure, as the next significant support is placed in the 24,500–24,350 zone,” he said.
The earlier support of 25,400 will likely act as a strong resistance on the upside, and a decisive close above 25,400 could trigger a pullback rally towards 25,600, the analyst added. “Buy Nifty in the 24,600–24,500 range with a final stop loss placed at 24,300,” Chouhan said.
“Over the short term, the index might remain under selling pressure, with rallies being sold into. Support on the lower end is placed at 25,000 / 24,750. On the higher end, resistance is placed at 25,370,” said Rupak De, Senior Technical Analyst at LKP Securities.