Sensex plunged over 1,600 points to the day’s low of 75,939, while Nifty fell over 450 points to slip below the 23,600 level, at 9.20 am. India VIX, which measures volatility in the markets, surged over 13% to rise above 21.
IndiGo, Bajaj Finance, Asian Paints, Bajaj Finserv, Maruti Suzuki and State Bank of India (SBI) shares were the top losers on Sensex, declining 3-4% each in the morning trading hours. Sun Pharma was the only stock trading in the green with marginal gains.
The sharp selloff was broad-based, with Nifty Midcap 100 and Nifty Smallcap 100 indices declining more than 2% each. Sectorally, PSU Banks were the top losers as the Nifty PSU Bank index declined nearly 3%. Nifty Realty, Nifty Auto and Nifty Consumer Durables meanwhile declined more than 2%.
Here are the 7 key factors pushing markets down today,
Live Events
1) Iran-US war fires up
US President Donald Trump ordered US military forces to begin blockading the Strait of Hormuz and clearing suspected sea mines, escalating tensions in the Middle East, after the peace talks brokered by Pakistan in Islamabad during the weekend failed to result in an agreement.
“So, there you have it, the meeting went well, most points were agreed to, but the only point that really mattered, NUCLEAR, was not. Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz…We will also begin destroying the mines the Iranians laid in the Straits. Any Iranian who fires at us, or at peaceful vessels, will be BLOWN TO HELL!” he wrote in a post on his social media platform Truth Social.
After Trump’s blockade threats, Iran’s Revolutionary Guards responded by warning that military vessels approaching the Strait will be considered a ceasefire breach and dealt with harshly and decisively.
2) Oil prices soar above $100/barrel
As a result of the escalations, oil prices soared back above the $100/barrel mark, after hovering near $95 last week amid hopes for the ceasefire talks culminating to a peace agreement. Brent crude futures rallied over 7% to $102 per barrel while WTI Crude surged 9% to trade near $105 per barrel on Monday morning.
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 for the majority of the time over that level since then.
3) Global markets tumble
As a result of the rising tensions in the oil-rich Middle East, most of the Asian markets tumbled sharply. Japan’s Nikkei and South Korea’s Kospi were down more than 1% each. Hong Kong’s Hang Seng was also down more than 1% while China’s Shanghai Composite fell 0.25%.
While Wall Street indices closed with marginal gains and losses on Friday, Dow Jones futures tumbled around 1% on Monday morning, indicating a bearish opening for the American stock markets later today.
4) Rupee falls
Indian rupee sharply declined as dollar strengthened. Rupee dropped 48 paise to trade at 93.31 against the US dollar in the early hours of Monday. The Indian currency had staged a sharp recovery in the first two weeks of April after the 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.
5) Bond yields rise
US bond yields soared amid the rising geopolitical tensions and resulting risk-off sentiment. The yield on benchmark US 10-year notes jumped to 4.349%, while the 30-year bond yield rose to 4.939%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, increased to 3.835%.
Rising bond yields typically are considered to redirect global capital flows away from Indian equities. The bond yields had sharply surged earlier during the Iran-US war for most of March. However, today’s sharp decrease may boost risk-on sentiment.
6) Profit booking
Indian stock markets recorded strong gains earlier this month, with Sensex and Nifty rising more than 6% each last week. This came after the incessant March selloff that wiped off massive sums of investor wealth from the markets.
Today’s fall may have also been intensified by profit booking, as sentiment remains fragile and investors adopt a ‘sell on rise’ approach.
7) Persistent FII outflows
Foreign investors have persistently remained bearish on Dalal Street, net selling Indian equities worth Rs 1.6 lakh crore for 25 consecutive sessions between March 2 to April 9. In fact, the selling streak overall continued for 27 consecutive sessions, starting from the end of February. However, foreign investors remained net buyers of Indian equities on Friday, breaking a 27-session-long selling streak and bringing much-needed relief. FII net bought Indian shares worth Rs 672 crore on April 10, according to data on NSE.
However, the net purchase of Indian equities seen on Friday is negligible in comparison to the massive outflows seen earlier this month and March overall. While this does not reflect FII behaviour today, heavy selling by foreign investors dampens investor sentiment.
What should investors do?
With the failure of US-Iran peace talks and Trump’s declaration of US naval blockade in the Strait of Hormuz, uncertainty and along with it crude price have spiked, explained VK Vijayakumar, Chief Investment Strategist, Geojit Investments. He added that Brent crude at $103 per barrel is emerging as another threat to the economy and markets.
“How this naval blockade, which in effect will be a US blockade of Iran’s blockade, will play out remains to be seen. There can be dramatic developments on the geopolitical front and consequently on markets also. The ideal strategy in this ultra-uncertain situation is to wait and watch,” according to the analyst, who expects the mild FII buying seen last Friday to be reversed today, further impacting sentiment.
(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)