MUMBAI: Fresh tensions between the US and Iran weighed heavily on global investor sentiment on Monday, sending crude oil prices higher, pushing the rupee below the 95-to-the-dollar mark, and triggering a sharp sell-off on Dalal Street. The BSE Sensex lost over 1,000 points in early trade, recovered some ground by mid-session, but fresh selling forced it to close 1,313 points (1.7%) lower at 76,015 points.
Foreign Funds Lead Sell-Off
Foreign portfolio investors (FPIs), which had already pulled out over Rs 2 lakh crore from the Indian stock market on a net basis till May 8 this year, led Monday's sell-off, according to BSE data. FPIs net sold stocks worth another Rs 8,438 crore during the day. In contrast, domestic institutional investors were net buyers at Rs 5,940 crore, providing some support to the market.
Geopolitical Tensions Weigh on Sentiment
According to Vinod Nair, Head of Research at Geojit Investments, markets slid sharply as renewed tensions in the Persian Gulf region, following President Donald Trump's rejection of Iran's peace proposal, dampened investor sentiment. "The cautious mood deepened after the Prime Minister's appeal to conserve energy and avoid non-essential foreign travel, prompting investors to reassess the economic impact of higher crude prices, rupee weakness, and pressure on the current account deficit," Nair said.
Nair noted that at present, India's strong fiscal position and healthy foreign exchange reserves are helping the government absorb the impact of elevated crude prices. However, prolonged geopolitical tensions could increase macroeconomic stress. Rising bond yields and persistent foreign fund outflow are likely to keep markets range-bound in the near term.
Investor Wealth Eroded by Over Rs 6 Lakh Crore
The day's session left investors poorer by a little over Rs 6 lakh crore, with BSE's market capitalisation now standing at Rs 467.3 lakh crore, according to official data. Among the Sensex stocks, Reliance Industries, HDFC Bank, and Bharti Airtel contributed the most to the day's fall.
Key Factors to Watch
Going forward, a combination of global and domestic factors that investors will keep a close watch on include crude oil prices, the weakness of the rupee, FPI trading trends, and the upcoming meeting between the presidents of the US and China, market analysts said. The interplay of these elements will likely dictate market direction in the coming sessions.
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