The situation on Dalal Street worsened on Monday as the main indices crashed in early trade amid rising global tensions and heavy selling pressure.
At 9:18 am, the BSE Sensex stood at 76,741.29, down 2,177.61 points (-2.76%), while the Nifty 50 fell 647.60 points to 23,802.85.
The decline reflects worsening investor sentiment as global risks intensify and foreign investors continue to pull money out of Indian equities.
It is worth noting that ongoing sell-off seems broad-based, with banking, IT and metal stocks among the worst hit in early trade.
ESCALATING MIDDLE EAST TENSIONS
A key trigger behind the sharp fall is the escalating conflict in the Middle East, which has entered a more volatile phase in recent days. The developments have raised concerns about global stability and possible disruptions to energy supplies.
Dr. Ravi Singh, Chief Research Officer at Master Capital Services Ltd., said the intensifying conflict has rattled markets worldwide.
“The recent turbulence in Indian equities can largely be attributed to three key factors. Firstly, the intensifying conflict in the Middle East has entered a more destructive phase over the past week, raising concerns about global stability and energy supply disruptions,” Singh said.
Periods of geopolitical uncertainty often push investors away from equities and toward safer assets, weighing on markets globally.
SURGE IN CRUDE OIL PRICES
Another factor weighing on markets is the sharp rise in crude oil prices. Oil has surged amid fears that the conflict could disrupt supply and tighten global availability.
For India, which relies heavily on imported crude, higher oil prices can increase the import bill and push up inflation.
“Secondly, crude oil prices surged nearly 25% during the week on supply-side fears, reigniting inflationary concerns across global markets and weighing on investor sentiment,” Singh added.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the sharp jump in oil prices could have wider economic consequences.
“Brent crude has spiked above $115 delivering a big oil shock to economies and markets. Big oil importers like India will be hit hard if the West Asian conflict lingers long and crude price remains high,” he said.
FII OUTFLOWS CONTINUE
Persistent selling by foreign institutional investors has also added to the pressure on the market. Global funds have been reducing exposure to Indian equities amid rising uncertainty.
“Lastly, the market continued to witness persistent outflows from foreign institutional investors, further adding to the downward pressure on domestic equities,” Singh said.
Vijayakumar noted that uncertainty around the duration of the conflict is also making foreign investors cautious.
“The unknown factor now is how long the conflict will last. This uncertainty will also weigh on FIIs who have again turned aggressive sellers in India after the short bout of buying in February,” he said.
He added that while geopolitical conflicts tend to shake markets in the short term, their impact usually does not last long.
“The lesson from history is that the impact of geopolitical issues like conflicts on markets does not last long. Therefore, investors have to be patient.”
According to him, sectors linked to domestic consumption such as banking, financials, automobiles, telecom and cement are unlikely to be heavily affected. Defense and pharmaceutical stocks could remain relatively resilient.
Analysts say market volatility could remain elevated in the near term as investors track geopolitical developments, crude oil prices and foreign investment flows.
