Sensex tumbled more than 500 points to 79,497, while Nifty 50 fell more than 130 points to 24,633, as seen at 9.20 am. This came a day after the benchmark indices rebounded following a multi-session selloff amid rising global geopolitical tensions.
ICICI Bank, IndiGo, L&T, UltraTech Cement, Tata Steel and HDFC Bank shares were the top losers on Sensex, falling 1-2.5%. HCLTech, Infosys, Tech Mahindra, Bharat Electronics (BEL) and Reliance Industries were among the top gainers.
Nifty Private Bank and Nifty PSU Bank were among the top losing sectoral indices on NSE, falling around 1% each, while Nifty IT gained 1.5% to emerge as the top sectoral gainer.
Rupee opened 0.05% lower at $91.65 against the US dollar, compared to the previous closing level of $91.60. Earlier this week, the Indian currency breached the crucial $92-mark as volatility spiked following rising global geopolitical uncertainties, pushing investors towards the safe-haven dollar assets.
Why is the stock market today? Here are 5 key factors
1) Iran-Israel war
The war between Iran and Israel-US continued to worsen, with the leaders of the countries threatening more escalations ahead. US Defense Secretary Pete Hegseth has said that the conflict has “only just begun”. US President Donald Trump said yesterday that he has “no time limits” on how long the war can go on.
Officials from the US said that the country has enough munitions to continue bombardment indefinitely in the area. The ongoing war in the oil-rich Middle East had intensified over the weekend after the US and Israel conducted military strikes against Iran, reportedly killing its Supreme Leader, Ayatollah Ali Khamenei. Iran subsequently launched retaliatory attacks across several parts of the oil-rich region. No sign of diplomatic resolution to the war has been spooking global investors this week.
2) Weak global markets
Global markets were mostly in the red after recording a sharp rebound in the previous session. South Korea’s Kospi dropped nearly 2%, while Hong Kong’s Hang Seng rose around 2%, as seen at 9.05 am IST. China’s Shanghai Composite was up 0.25%, while Japan’s Nikkei 225 was trading almost flat, being down 0.01%.
European markets closed in the deep red earlier yesterday, with Germany’s DAX falling nearly 2%, and France’s CAC and the UK’s FTSE 100 being down around 1.5% each.
Wall Street ended the previous session lower, with S&P 500 falling 0.56% and the tech-heavy Nasdaq declining around 0.3%.
3) Bond yield rises
Indian bond yield had climbed sharply earlier this week, tracking the sharp increase in crude oil prices amid escalating geopolitical tensions in the Middle East. Today, the bond yield on the benchmark 10-year government security has increased at 6.65%. As bond yields rise, they make government bonds more attractive than stocks, creating downside potential for markets.
4) FII selling persists
Foreign investors remained net sellers of Indian equities during the previous session, selling shares worth Rs 3,752 crore, according to data on NSE. Domestic investors remained net buyers, purchasing Indian equities worth Rs 5,153 crore on Thursday. While this doesn’t reflect their trading behaviour today, persistent selling by foreign investors dampens investor sentiment.
FII have sold Indian equities worth Rs 21,436 crore this month so far, as the war in the Middle East spooked investors.
Further, Morgan Stanley has reduced its exposure to Indian markets, while adopting a more cautious stance on Asian equities amid concerns that the Iran war may disrupt supply chains if oil flows through the Strait of Hormuz fail to recover. “We stay defensive,” Morgan Stanley strategists said, adding, “Asia remains critically dependent on Middle Eastern supply of crude oil, refined products and LNG and we believe the market is too complacent about supply chain risks.”
The strategists downgraded India from overweight to equal-weight, saying that the country is one of the Asian markets most exposed to potential Qatari LNG supply disruptions. With uncertainty around AI and high valuations, global investors are likely to wait until South Korea and Taiwan’s tech cycle peaks before shifting back toward India, they added.
5) Oil prices remain elevated
Oil prices have seen a massive rally since the beginning of the Middle East conflict, as the Strait of Hormuz effectively closed for traffic, leading to disruption of shipments and supply constraints. However, oil prices have declined for the first time today in six days as the US government gave waivers to Indian refiners to buy Russian crude to ease supply constraints from the Middle East war. Additionally, Reuters reported that the US Treasury Department is expected to announce measures to tackle rising energy prices, including potential action involving the oil futures market.
Despite today’s decline, the prices remain elevated and significantly higher than the pre-war levels. The Strait of Hormuz continues to remain effectively shut for regular traffic after several tankers were bombed in the area. More than 20% of the world’s oil supply passes through the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
Brent crude futures are now trading around $83 per barrel, after having touched a low of $69 just about a week ago. US crude shot up to a 20-month high earlier this week. Both are set to clock a rise of more than 15% for the week, their largest since February 2022 when the war between Russia and Ukraine broke out.
Also read: How’s the josh? Defence stocks on fire as Iran-Israel war spurs momentum chasing
Iran’s strategy of attacking US bases in at least 10 Middle Eastern countries, along with the closure of the Strait of Hormuz, has paralysed the global trade passing through the Persian Gulf, JM Financial said. The spike in crude oil price (+30%) and freight (+46%) since January indicates the markets had already factored in the risk premium before the war broke out, it noted.
However, the domestic brokerage cautioned that if the Strait of Hormuz effectively remains closed for more than a week, it will impact crude oil prices sharply. This may continue to impact stock markets.
Rupak De, Senior Technical Analyst at LKP Securities, said that the Nifty 50 continues to trade well below the 200 DMA as well as the former trendline support, which now acts as resistance. “On the downside, support is placed at 24,530/24,300. On the upside, resistance is seen at 24,850/25,000. The “sell on rise” approach remains valid until the Nifty decisively moves above 25,000,” he said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)