Indian equity benchmarks declined for a second straight session, pressured by a spike in crude oil prices, a weakening rupee and rising geopolitical tensions. Broad-based selling, FII outflows and rising bond yields weighed on sentiment, while volatility increased. Analysts expect near-term market direction to remain uncertain amid global risks and elevated oil prices.

Why is stock market falling today? Sensex plunges 800 pts, Nifty breaks 24,200. 6 reasons behind the selloff

Synopsis

Indian equity benchmarks declined for a second straight session, pressured by a spike in crude oil prices, a weakening rupee and rising geopolitical tensions. Broad-based selling, FII outflows and rising bond yields weighed on sentiment, while volatility increased. Analysts expect near-term market direction to remain uncertain amid global risks and elevated oil prices.

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Indian benchmark indices extended losses for the second consecutive session, with Sensex and Nifty falling nearly 1% each as oil prices jumped back above $100 per barrel, the rupee tanked, along with other factors that weighed on markets.

Sensex dropped over 823 points to 77,693, while Nifty 50 tumbled over 218 points to 24,159 in the early trading hours of Thursday, as of 9.16 am. The sharp drop wiped off more than Rs 2 lakh crore from the total market capitalisation of all companies listed on BSE, dragging it down to Rs 467 lakh crore.

India VIX, which measures volatility in markets, jumped 3% to 18.84 in the morning as escalating tensions in the oil-rich Middle East spooked investors. The sell-off was broad-based, although it was milder in the broader markets than the benchmarks. Nifty Midcap 100 and Nifty Smallcap 100 indices declined up to 0.45%.

Sectorally, Nifty Consumer Durables and Nifty Auto declined more than 1% to emerge as the top losers. Bucking the trend, Nifty Pharma was up over 0.5%.

"With total uncertainty becoming the new normal, there is no clarity on the near-term direction of the market,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. With the duration of the war going beyond everyone’s initial expectations and the price of Brent crude bouncing back to $103, the analyst noted that there is increasing risk to global growth in general and higher risk to India’s macros in particular. If Brent crude remains at an average of $100 for many months, India’s growth and corporate earnings will take a hit, he warned, adding that the market has not discounted this yet.

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Here are the key factors pushing markets down today.

1) US-Iran tensions escalate

US President Donald Trump extended his April 22 deadline for an Iran war ceasefire, but tensions were far from over. The US Navy's blockade of Iranian ports remained in effect, and Iran seized at least two ships in the Strait of Hormuz.

After the previous round of negotiations failed to culminate in a deal, Pakistan was expected to host a second round of talks. However, investors are now increasingly doubting the possibility of any such talks actually taking place. The White House suspended Vice President JD Vance's planned trip to Islamabad as Iran rebuffed efforts to restart negotiations.

2) Oil prices spike back above $100 per barrel

After comfortably falling below the $100 per barrel mark earlier this month, oil prices soared back above the crucial level today as fresh attacks near the Strait of Hormuz spooked investors about supply concerns. Brent crude futures jumped over 1.5% to $103.5 per barrel, while WTI crude rose nearly 2% to $94.64 per barrel.

Oil prices had crossed the $100 per barrel mark earlier in March following the outbreak of the war between Iran and US-Israel, marking the first time since Russia’s invasion of Ukraine in 2022.

3) Global markets in the red

Global markets slipped into the red as oil prices soared and tensions escalated. Japan’s Nikkei dropped more than 1%. Hong Kong’s Hang Seng, China’s Shanghai Composite and South Korea’s Kospi declined nearly 1% each.

Wall Street had ended sharply higher in the previous session, with the tech-heavy Nasdaq jumping nearly 2% and the S&P 500 rising over 1%. However, Dow Jones futures were down around 1% today, indicating a bearish opening for the US stock market later in the day.

4) Rupee slides

The rupee weakened further against the US dollar, crossing the 94 mark. The Indian currency dropped 34 paise to 94.12 against the US dollar in early trade. Notably, the rupee had recovered slightly earlier this month following RBI intervention, after crossing the 95 mark for the first time.

“Rupee continued to trade weak as rising crude oil prices and ongoing geopolitical uncertainty kept pressure on the currency. The weakness is also linked to the RBI’s partial rollback of earlier forex curbs, which has eased restrictions on derivative trades and reduced some of the earlier support for the rupee,” said Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities. “In the near term, the rupee is expected to trade in a range of 93.25 to 94.50, with direction largely driven by crude prices and geopolitical updates,” he added.

5) FII selling

Foreign investors remained net sellers of Indian equities on Wednesday, selling shares worth Rs 2,078 crore, according to provisional data on NSE. Domestic institutional investors also sold Indian equities worth Rs 1,048 crore in the previous session.

While this does not reflect their behaviour in Indian markets today, sustained selling by FIIs dampens sentiment and weighs on markets.

6) Bond yields rise

As a result of renewed worries, bond yields rose. The yield on benchmark US 10-year notes rose to 4.319%, while the 30-year bond yield rose to 4.922%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, jumped to 3.81%.

7) Technical view on Nifty

Volatility is expected to remain high on account of geopolitical tensions and volatile crude oil prices. “Short-term support for Nifty is positioned around the 23,600-23,500 range, being the confluence of last week’s low and the 38.2% retracement of the last three weeks’ pullback (22,183-24,601). Forming a higher high and higher low on the weekly chart will keep the current pullback trend intact,” said Bajaj Broking.

Looking ahead, Osho Krishan, Chief Manager, Technical & Derivative Research at Angle One, retains a constructive outlook, advocating a buy-on-dips strategy, provided the technical structure remains intact. “However, participants should remain vigilant to global developments that could influence the intermediate trend, while maintaining a disciplined, stock-specific approach to navigate evolving market conditions effectively,” he said.

(With inputs from agencies)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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