Stock market crash: Following the escalation of the US-Iran war and soaring crude oil prices, key Dalal Street indices are under intense selling pressure. The Nifty 50 index opened lower at 23,415 and touched an intraday low of 23,225, logging over 250 points loss within an hour of the Indian stock market opening. The BSE Sensex had a downside opening at 74,507 and touched an intraday low of 73,719, logging an intraday loss of around 930 points. Likewise, the Bank Nifty index opened with a downside gap at 53,541 and touched an intraday low of 53,127, recording an intraday loss of 587 points during the Opening Bell.
Why is the market falling today?
On the reasons that have put the Indian stock market under pressure since early morning trading, market experts said the key benchmark indices are under sell-off pressure due to renewed tensions in the US-Iran war, soaring crude oil prices, inflation concerns, and hawkish global central banks. Outflows of US Dollar (USD) reserves and a forecast of a bad monsoon are also weighing on Indian stocks.
1] US-Iran war: Hostilities flared in the Gulf after US-Iran peace talks stalled. According to the news agency Reuters, the US military said Iranian missile attacks on Bahrain, Kuwait and other regional targets were either thwarted or failed as diplomacy between Washington and Tehran made little headway.
“Due to the renewed tension in the US-Iran war, a fresh geopolitical uncertainty has resurfaced, which has triggered selling pressure on Dalal Street,” said Anuj Gupta, a SEBI-registered market expert.
2] Renewed inflation fear: After the escalation in the Middle East tension, the crude oil prices witnessed sharp buying during the Wednesday dealing, which fueled speculations about the rising pressure of the crude oil imports on the national economy. As the Indian economy is a net importer, this has renewed inflationary concerns among market investors.
“Soaring crude oil prices on the escalating tension in the Middle East has renewed the fear of inflation in the Indian economy as we import around 85% of our total oil demand. This is expected to fuel the outflow of the US Dollar at a time when the FIIs have remained net sellers for nearly one year,” said Avinash Gorakshkar, a SEBI-registered fundamental equity analyst.
3] Hawkish central banks: The market is expecting a liquidity crisis in the near-term as central banks across the world are under pressure due to rising inflation fears. As the RBI MPC meeting has begun today, market investors are keeping their fingers crossed, wondering whether there will be a rate hike at this meeting.
“Due to renewed inflation fears among market investors, the market is in a wait-and-watch position as the RBI MPC meeting has begun today, and a final outcome will become public on Friday. A rate hike announcement is expected to trigger fresh selling due to the squeeze in the liquidity available in the market,” said Sandeep Pandey, Co-founder of Basav Capital.
4] Bad monsoon forecast: “The market is under pressure due to the bad monsoon forecast and hence the entire economy is expected to come under pressure, leading to a rise in the fiscal deficit and weak quarterly earnings in the upcoming quarters of the FY27,” said Sandeep Pandey of Basav Capital.
5] USD reserve under pressure: Due to the continued selling by the FIIs and the Indian National Rupee (INR) coming close to 100 against the USD, the Reserve Bank of India (RBI) had to sell out the USD from its reserves. This became apparent when the Indian government began discouraging imports of gold, silver, and other base metals.
“The market is also sensing that Indian dollar reserves are under pressure, which forced the Central Government to discourage imports of gold, silver and some base metals. This step is aimed to containing the dollar outflow from the country,” said Anuj Gupta.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
