The Indian equity markets faced a severe downturn on the final trading day of the week, with major indices recording significant losses. Heightened geopolitical tensions between Iran and Israel have fueled global uncertainty, directly impacting sentiment on Dalal Street. Friday marked the third consecutive session of decline for the domestic markets. Due to this sharp correction, the total market capitalization of BSE-listed companies plummeted by approximately ₹10 lakh crore within a few hours of trading.
Sharp Decline in Major Indices and Market Capitalization
93%. 10. According to market data, the widespread selling pressure resulted in a massive erosion of investor wealth. The sell-off was visible across sectors, with banking, IT, and auto stocks being the hardest hit, as investors adopted a cautious approach amid volatile global conditions.
Surge in Global Crude Oil Prices
Concerns over global oil supply have intensified following reports of attacks on two oil tankers by Iran, while 5 on Friday. As India imports more than 80% of its crude oil requirements, any spike in international prices directly impacts the country's import bill and inflation. This correlation led to a negative reaction in the stock market as higher energy costs affect corporate margins.
Negative Cues from International Markets
The escalating conflict in West Asia has sent ripples across global financial markets. In Asia, major indices including South Korea's KOSPI, Japan's Nikkei 225, China's SSE Composite, and Hong Kong's Hang Seng ended the day in the red. The US markets also witnessed a sharp decline, with the Dow Jones Industrial Average falling over 700 points to close below the 47,000 mark for the first time this year. The weakness in S&P 500 and Nasdaq Composite further dampened the sentiment for Indian equities.
Persistent Selling by Foreign Institutional Investors
A primary driver behind the domestic market slump is the continuous outflow of capital by Foreign Institutional Investors (FIIs). 87 crore on Thursday alone. In the month of March so far, foreign investors have withdrawn more than ₹39,000 crore from the Indian markets. This sustained selling by institutional players has put immense pressure on the indices, offsetting domestic institutional buying and contributing to the downward spiral.
Rupee Hits Record Low Against US Dollar
Compounding the market's woes, the Indian Rupee fell to a fresh record low against the US Dollar on Friday. 37.37 during the day. The weakening of the rupee is attributed to the strengthening of the greenback and the ongoing geopolitical crisis. A weaker currency makes imports more expensive and raises concerns about the fiscal deficit, further weighing on the equity market performance.