Indian equity benchmarks experienced a sharp decline in morning trade on Thursday, as global cues turned negative due to a combination of adverse factors. The Nifty50 index slipped below the 23,800 mark, while the BSE Sensex plunged approximately 1,200 points, reflecting widespread investor pessimism.
Market Performance at 11:18 AM
At 11:18 AM, the Nifty50 was trading at 23,810.30, down 367 points or 1.52%. The BSE Sensex stood at 76,300.04, recording a loss of 1,196 points or 1.54%. The steep decline wiped out nearly Rs 9 lakh crore from the combined market capitalisation of BSE-listed companies, reducing it to around Rs 460 lakh crore, according to an ET report.
Broader Market and Volatility
The sell-off was widespread, extending beyond large-cap stocks to the broader market. The Nifty Smallcap 100 index declined 0.5%, while the Nifty Midcap 100 index fell more than 1%. Reflecting heightened uncertainty, India VIX, the market’s volatility gauge, rose about 5% to 18.29.
According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, the market is currently facing two significant challenges. First, Brent crude hovering around $120 a barrel poses a serious risk to India’s macroeconomic stability. Prolonged elevated oil prices could weaken growth prospects while simultaneously intensifying inflationary pressures. Second, stronger-than-expected earnings from leading artificial intelligence companies in the United States and South Korea may further fuel the global AI investment theme, potentially leading to continued portfolio outflows from India and creating additional pressure on domestic markets.
Key Reasons Behind the Market Crash
Trump Warns of Prolonged Blockade
Investor concerns were amplified after US President Donald Trump indicated that the US blockade of Iranian ports through the Strait of Hormuz could continue for months, as diplomatic efforts remain deadlocked. Although Iran has reportedly put forward a fresh proposal aimed at ending the ongoing conflict, Trump appears unconvinced.
Crude Oil Climbs Above $120 a Barrel
Oil prices rallied sharply amid mounting geopolitical tensions, breaching the $120-per-barrel mark for the first time since Russia’s 2022 invasion of Ukraine. In early Thursday trade, Brent crude futures advanced about 4% to around $123 a barrel. After slipping well below $100 earlier this month, crude has staged a strong rebound. Prices moved back above that key threshold last week following renewed attacks near the Strait of Hormuz, heightening fears of potential supply disruptions in a strategically vital shipping route.
US Federal Reserve Adopts Hawkish Tone
The US Federal Reserve left interest rates unchanged, but the policy decision was its most divided in more than three decades. Three policymakers dissented, objecting to guidance that continued to imply a leaning toward future rate cuts. In its statement, the Fed noted that recent developments in the Middle East have added to uncertainty surrounding the economic outlook.
Rupee Falls to a Record Low
The Indian rupee weakened further on Thursday, touching a new all-time low of 95.07 against the US dollar. Jateen Trivedi, Vice President and Research Analyst for Commodity and Currency at LKP Securities, had cautioned that persistent foreign institutional investor outflows, combined with elevated crude oil prices, are continuing to weigh heavily on the domestic currency.
Global Equities Under Pressure
Most major global equity markets traded lower as the sharp rise in oil prices weighed on investor sentiment. Japan’s Nikkei dropped more than 1.2%, while Hong Kong’s Hang Seng declined over 1.3%. South Korea’s Kospi also slipped by around 0.5%. In contrast, China’s Shanghai Composite managed to hold steady and was trading marginally higher. European markets had already ended the previous session with significant losses, with the UK’s FTSE 100 falling more than 1%. In the United States, Wall Street finished on a mixed note. While the broader market was largely unchanged, the Nasdaq managed to close slightly higher.
(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.)
