The Indian equity markets experienced a significant downturn on Thursday, leading to a substantial erosion of investor wealth. Amid escalating geopolitical tensions between Iran and the US-Israel combine, market sentiment remained highly volatile. During the trading session, the BSE Sensex plunged by nearly 2700 points, while the NSE Nifty dropped by over 700 points. This crash resulted in the total market capitalization of BSE-listed companies falling to approximately ₹427 lakh crore.
26% or 2,496 points lower at 74,207.26% or 775 points. The massive sell-off wiped out over ₹13 lakh crore of investor wealth in a single day. All 30 stocks within the Sensex pack ended in the red, reflecting a broad-based decline across sectors including banking, auto, and real estate.
Surge in Crude Oil Prices and Geopolitical Tensions
A primary catalyst for the market collapse was the sharp spike in international crude oil prices. Brent crude surpassed the $116 per barrel mark due to heightened tensions in the Middle East and concerns over the closure of the Strait of Hormuz. Reports from major energy firms indicated that missile strikes had caused significant damage to LNG infrastructure in the region. Also, the suspension of gas facilities in the UAE added to supply constraints. The geopolitical instability has raised concerns regarding global energy security, directly impacting energy-dependent economies like India.
Hawkish Stance by the US Federal Reserve
The monetary policy outlook from the US Federal Reserve Importantly dampened investor confidence. 75% range, with Chairman Jerome Powell noting that inflation isn't receding as quickly as anticipated. 7% by year-end, which is higher than previous estimates. This hawkish stance has led to a global risk-off sentiment, prompting investors to move away from emerging market equities.
Global Market Decline and Rising Bond Yields
The weakness in the Indian market mirrored a global trend of declining indices, while 63%. Asian markets also faced severe pressure, with Japan’s Nikkei dropping 4% and South Korea’s Kospi declining by 3%. 77%. Rising yields often lead to capital outflows from equity markets as fixed-income assets become more attractive.
FII Selling Pressure and Rupee Depreciation
Persistent selling by Foreign Institutional Investors (FIIs) has further strained the domestic market. Data indicates that FIIs offloaded shares worth ₹2,714 crore in a single session, marking the 14th consecutive day of net selling. Also, the Indian Rupee faced downward pressure, trading near record lows against the US Dollar. The rising cost of crude oil imports is expected to widen the trade deficit, further weighing on the currency. Market experts also noted that profit-booking after the recent rally contributed to the accelerated decline in major indices.