Sensex crashed over 1,100 points to 72,480, while the Nifty 50 sank 333 points to 22,486 at the early trading hours of Monday. The sharp selloff wiped off around Rs 7 lakh crore from the total market capitalisation of all companies listed on BSE, dragging it down to Rs 415 lakh crore.
Axis Bank, Kotak Mahindra Bank, State Bank of India (SBI), Bajaj Finserv, Bajaj Finance and HDFC Bank shares were the top losers on Sensex, falling 2-4%. Bharat Electronics, Reliance Industries and NTPC were the only gainers on the index, trading with marginal gains.
As India Vix, which measures volatility in the markets, surged more than 7%, most of the sectors fell prey to the risk off sentiment. Nifty PSU Bank and Nifty Private Bank dropped more than 2.5% each. Nifty Metal was the only sectoral index on NSE trading in the green with marginal gains. Around 2,143 stocks declined on the stock exchange, while 505 advanced and 63 remained unchanged.
Here are the key factors pushing markets down today:
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1) US-Iran war jitters
President Donald Trump-led US administration is preparing for weeks of ground operations in Iran, the Washington Post reported yesterday. US Central Command said on X that it has deployed 3,500 Marines and sailors to the Middle East aboard the USS Tripoli, marking the largest American military buildup in the region in two decades.
Iran’s parliament speaker, meanwhile, warned that the country’s forces were “waiting for American soldiers” and would “rain fire” on any US troops attempting to enter Iranian territory. In his message, reported by Iranian state media, Ghalibaf also said “the enemy signals negotiation in public, while in secret it plots a ground attack”. Additionally, Yemeni Houthis launched their first attacks on Israel over the weekend, widening the ongoing war and adding to inflation woes.
The war, which began earlier this month with US-Israeli strikes killing Iran’s former supreme leader Ayatollah Ali Khammenei and resulting in massive retaliation from Tehran, has spread across the Middle East. Fear now rises for a ground offensive and the entry of Yemen’s Iran-aligned Houthis.
2) Oil prices near $120/barrel
As a result of the rising hostilities in the Middle East, the ongoing rally in oil prices regained strength. Brent crude futures jumped over 3.4% to trade at $116 per barrel, while West Texas Intermediate (WTI) futures gained more than 3% to trade at $103 per barrel, as seen at around 8 am IST.
Macquarie has warned that crude prices could surge to an unprecedented $200 a barrel if the Iran conflict drags into mid-year and keeps the vital Strait of Hormuz shut. “If the strait were to stay closed for an extended period, prices would need to move high enough to destroy an historically large amount of global oil demand,” the Macquarie analysts said in the March 27 report, as reported by Bloomberg. “The timing of the re-opening of the straits, and physical damage to energy infrastructure, is the main determinant of the longer-term impact on commodities,” it added.
3) Global markets in red
Global markets tumbled, with Dalal Street being no exception. Japan’s Nikkei plunged more than 3%, while South Korea’s Kospi sank around 3%. Taiwan Weighted dropped 1.5%, while Hang Seng declined nearly 1%.
Wall Street closed the previous session in the deep red, with S&P 500 falling around 1.7% and tech-heavy Nasdaq declining over 2%. European markets also closed in the red, with Germany’s DAX falling over 1%, France’s CAC declining 0.9% and UK’s FTSE remaining almost flat.
4) FII selling continues
Indian stock markets have seen relentless selling by foreign investors, which has weighed down on rupee and sentiment. FIIs remained net sellers on Indian equities for the 20th consecutive session, net selling shares worth nearly Rs 4,367 crore on Friday, according to data on NSE. While this does not reflect today’s activity, sustained outflows in recent sessions have weighed on investor sentiment.
5) RBI caps banks’ FX positions
The Reserve Bank of India (RBI) on Friday directed banks to cap their net open rupee positions in the foreign exchange market at $100 million by the end of each business day, with compliance required latest by April 10. The RBI’s curbs on onshore position limits are expected to lead to dollar selling by banks in the domestic foreign exchange market amid unwinding of existing arbitrage positions.
These arbitrage trades were built by buying dollars onshore and selling them in the NDF market to exploit the spread between the two segments. This spread had widened significantly amid sharp rise in volatility and fall in rupee on heightened risk aversion and oil-driven pressures amid the US-Iran war.
While this led to a much-needed relief in rupee, bank stocks significantly declined, which in turn pulled down benchmark indices.
What lies ahead?
With the conflict in West Asia entering the fifth week, there are signs of escalation of the war with the Houthi’s joining the conflict and the US sending additional troops to reinforce the attack, noted VK Vijayakumar, Chief Investment Strategist at Geojit Investments. “The Goldilocks macro scenario which India had before the war has almost disappeared thanks to the war. Instead of high GDP growth, low inflation, moderate fiscal and current account deficits and expectations of higher corporate earnings growth in FY27, now we face prospects of lower GDP growth, higher inflation, higher fiscal and current account deficits and lower earnings growth for FY27,” he added.
The analyst said that the market has largely discounted these negatives as reflected in the decline in the Nifty trailing PE ratio to about 19.9 times. This is fair but not yet cheap valuations. But there are segments which are attractively valued like financials, according to Vijayakumar.
“A significant development today is likely to be strengthening of the rupee in response to the RBI directive capping the net open position (NOP- INR) in the offshore deliverable market at $100 million. Unwinding of large dollar positions will strengthen the rupee in the near-term,” he said.
Technical view
Given the prevailing market uncertainties, a sell-on-rise approach may remain suitable in the near term, said Rupak De, Senior Technical Analyst at LKP Securities. “Technically, any rebound towards 23,500 could face selling pressure, as this level is likely to act as an immediate resistance. On the downside, a break below 22,800 may lead to further weakness in the market,” he added.
(With inputs from Reuters)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)