Indias benchmark equity gauges slumped 2.5% on Monday, with the sell-off eroding ₹14 lakh crore market cap in all BSE-listed companies. A rebound, however, is expected on Tuesday after the US President said attacks on Iran would be stopped for the next five days.

Blues on Monday; Bulls may Rock Today

Synopsis

India’s benchmark equity gauges slumped 2.5% on Monday, with the sell-off eroding ₹14 lakh crore market cap in all BSE-listed companies. A rebound, however, is expected on Tuesday after the US President said attacks on Iran would be stopped for the next five days.

Nifty finished at 22,512.65 — the lowest closing level since March last year — falling 601.85 points or 2.6%. Sensex ended at 72,696.39, down 2.5% or 1,836.57 points. Domestic indices have slumped nearly 11% since the start of West Asian hostilities.

Trump’s remarks, made after trading ended in Mumbai, sparked a 750-point rally in Dow Jones Industrial futures, a 3.1% surge in GIFT Nifty futures, and a 10% plunge in oil prices late on Monday.

“There is a possibility of a relief rally of up to 3-4% on Tuesday led by short covering as concerns of further escalations ease — at least for five days,” said Sunny Agrawal, head of fundamental research, SBI Securities.

Trump's weekend warnings had sent shockwaves across the global financial markets, pulverising risk assets across the Asia Pacific.

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Elsewhere in Asia, South Korea slumped 6.5% despite record purchases by retail investors in Seoul, while China fell 3.6%. Japan and Hong Kong dropped 3.5% each. Taiwan fell 2.5% on Monday.

“The sharp reaction in the markets on Monday was due to the comments made by the US and Iran on further escalations and uncertainty about the duration of war and the subsequent risk of supply disruptions across sectors,” said George Thomas, Fund Manager-Equity, Quantum AMC.

Brent crude futures rose 2.5% to $109 a barrel earlier on Monday but cooled off to $96.8 after Trump’s reconciliatory remarks.

“The US is also under inflationary pressure which could mean that this conflict may not be long drawn,” said Thomas. “Investors can make staggered purchases, but it is advised to keep some dry powder because it is tough to tell whether the market has bottomed out.”

All sectoral indices slumped Monday. Nifty Consumer Durables slumped 5.2% while Nifty Metal and Realty indices dropped nearly 5%. Nifty PSU Bank fell 4.1% while Bank Nifty shed 3.7%.

Foreign portfolio investors (FPIs) sold shares worth a net Rs 5,518.4 crore on Monday. Their domestic counterparts bought shares worth Rs 5,706.23 crore. In March, global investors dumped stocks worth Rs 95,780.3 crore.

“Unless crude falls decisively, the rally might not be sustainable, and bears might return at higher levels,” said Rupak De, senior technical analyst at LKP Securities. “The index might move towards 23000-23500 in the near term.”

The Volatility Index (VIX) spiked 17.2% to 26.73, indicating that traders anticipate elevated risk in the near term.

De said that the VIX could spike up further till 31-32 in the short term but also cross this threshold as uncertainty looms large. The broader markets witnessed sharper cuts. The Nifty Mid-cap 150 index dropped over 3.5% each. In the past one week, the mid-cap and small-cap indices declined around 3.6% and 3.9%, respectively.

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