Benchmark equity indices were trading sharply lower on Thursday, with the Sensex dropping over 1,800 points and the Nifty50 slipping below the 25,250 mark. The decline was in line with losses in other Asian markets as investors curbed their risk appetite amid the escalating Middle East conflict.
The BSE Sensex was trading 1,811 points or 2.15%, lower at 82,455.08. The Nifty50 slumped 554 points to 25,242 at 2:10 pm.
The market capitalisation of all listed companies on BSE declined by Rs 10.56 lakh crore to Rs 464.3 lakh crore.
Concerns over a potential escalation in the Middle East grew after Iran launched ballistic missiles at Israel earlier in the week, fueling fears that oil supplies from the region could be disrupted if the conflict intensifies.
Oil prices ticked higher on the day. A rise in oil prices is a negative for importers of the commodity like India, as crude contributes significantly to the country’s import bill.
From the Sensex pack, Reliance Industries, HDFC Bank, ICICI Bank, M&M, L&T, and Bharti Airtel were the top contributors dragging the index down, while JSW Steel and Tata Steel were the only stocks that opened higher.
The Nifty Oil & Gas index dropped over 1.2% in early trade, weighed down by concerns over the escalating Middle East conflict.
Hindustan Petroleum, IOC, and GSPL were the top laggards on the index. Meanwhile, the fear gauge India VIX jumped 8.9% to 13.06.
Here are the key factors behind today’s meltdown
1) Iran-Israel Clash
Indian stocks declined on Thursday amid rising concerns over the escalating hostilities between Iran and Israel. Reports indicate that the Israeli military has confirmed the deaths of eight soldiers, including a team commander, during ground operations in southern Lebanon.
This escalation follows Iranian missile attacks targeting Tel Aviv, with Israel’s military chief warning of an imminent response.
2) Rise in crude oil prices
Oil prices increased amid concerns that escalating tensions in the Middle East could threaten supplies from major producers. Brent crude briefly surpassed $75 per barrel, while West Texas Intermediate topped $72, with both benchmarks rising nearly 5% over the past three days.A rise in oil prices is a negative for importers of the commodity like India, as crude contributes significantly to the country’s import bill.
“The situation will change if Israel attacks any oil installations in Iran which will trigger a huge spike in crude. If it happens, it can turn out to be more damaging for oil importers like India. Therefore, investors should watch the emerging situation very closely,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
3) Sebi tightens F&O measures
The recent decision by market regulator Sebi to tighten rules in the futures and options (F&O) segment has also contributed to the decline in equity markets today. Analysts stated that these new measures, which include limiting weekly expiries to one per exchange and increasing contract sizes, may dampen retail sentiment and reduce trading volumes.
This uncertainty around trading dynamics has likely fueled investor concerns, adding to the market’s downward pressure amid broader geopolitical tensions.
4) China factor
Investors in India are increasingly worried about the resurgence of Chinese stocks, which have underperformed in recent years. Following the announcement of economic stimulus measures by the Chinese government last week, analysts predict sustained growth in Chinese stocks, prompting a potential outflow of funds from India.
The SSE Composite index rose 8% on Tuesday and has gained over 15% in the past week. As a result, foreign institutional investors have withdrawn Rs 15,370 crore from Indian equities in the last two trading sessions.
