Sensex, Nifty Fall 1%: 4 Key Factors Behind ₹6 Lakh Crore Market Loss

Benchmark equity indices in India opened significantly lower on Thursday, with the BSE Sensex plummeting over 1,250 points and the Nifty50 slipping beneath the 25,500 mark. This decline mirrors losses in other Asian markets, driven by investor apprehension amid escalating conflict in the Middle East.

Market Performance Overview

As of 9:16 AM, the BSE Sensex was trading at 83,002, reflecting a decrease of 1,264 points or 1.5%. Meanwhile, the Nifty50 experienced a decline of 344 points, or 1.33%, trading at 25,452. The combined market capitalization of all listed companies on the BSE fell by Rs 5.63 lakh crore, bringing the total to Rs 469.23 lakh crore.

Geopolitical Concerns Fuel Market Decline

Iran-Israel Conflict Escalation

The downturn in Indian stocks is largely attributed to growing concerns surrounding the intensifying hostilities between Iran and Israel. Reports have confirmed that eight Israeli soldiers, including a team commander, were killed during military operations in southern Lebanon. This escalation follows Iranian missile strikes targeting Tel Aviv, with Israel’s military chief warning of a possible retaliatory response.

Impact on Oil Prices

In light of these geopolitical tensions, oil prices have risen. Brent crude briefly surpassed $75 per barrel, while West Texas Intermediate (WTI) topped $72, marking an increase of nearly 5% over the last three days. For a country like India, which is heavily reliant on oil imports, rising crude prices present a significant challenge to its 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,” cautioned Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Market Dynamics and Regulatory Changes

Regulatory Measures from Sebi

The decline in equity markets has also been exacerbated by the recent decision from the Securities and Exchange Board of India (Sebi) to tighten regulations in the futures and options (F&O) segment. Analysts believe that these new measures, which include limiting weekly expiries to one per exchange and increasing contract sizes, may dampen retail investor sentiment and reduce trading volumes. This uncertainty around trading dynamics has likely contributed to the downward pressure on the market amid broader geopolitical tensions.

Concerns Over Chinese Market Resurgence

Adding to the anxiety among Indian investors is the recent resurgence of Chinese stocks, which have lagged in performance over the past few years. Following the Chinese government’s announcement of economic stimulus measures last week, analysts forecast sustained growth in Chinese stocks, potentially leading to capital outflows from India. The SSE Composite index surged by 8% on Tuesday and has gained over 15% in the past week. Consequently, foreign institutional investors have withdrawn Rs 15,370 crore from Indian equities over the last two trading sessions.

Sector-Specific Impacts

Within the Sensex pack, key contributors to the decline included Reliance Industries, HDFC Bank, ICICI Bank, Mahindra & Mahindra, L&T, and Bharti Airtel. In contrast, JSW Steel and Tata Steel were the only stocks that opened higher. The Nifty Oil & Gas index also saw a decline of over 1.2%, impacted by ongoing concerns regarding the geopolitical landscape.