Indian Stock Market Plunges Over 2% Amid Fed Decision and Middle East Tensions
Indian equity benchmarks witnessed a severe crash in opening trade on Thursday, with both the Nifty50 and BSE Sensex plummeting over 2% as global markets reacted to the US Federal Reserve's decision to keep policy rates unchanged and escalating geopolitical tensions in the Middle East. The Nifty50 dropped below the 23,300 mark, while the BSE Sensex fell by more than 1,600 points, erasing gains from the previous three sessions.
Market Performance and Key Levels
At 9:16 AM, the Nifty50 was trading at 23,277.35, down 500 points or 2.10%, and the BSE Sensex stood at 75,072.24, down 1,632 points or 2.13%. This sharp decline followed a recovery earlier in the week, which was quickly wiped out by renewed fears over the Israel-Iran conflict and its impact on oil prices.
Impact of US Federal Reserve and Global Cues
The US Federal Reserve's announcement to maintain interest rates and signal just one rate cut for the year contributed to the sell-off, as Wall Street closed sharply lower on Wednesday. Asian markets also came under pressure in early Thursday trade, tracking weak cues from the United States and reacting to fresh attacks on critical energy infrastructure in the Middle East, which pushed oil prices higher.
Geopolitical Tensions and Oil Price Surge
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, highlighted the worsening uncertainty due to the war. "The uncertainty surrounding the war has turned worse with Israel hitting the world’s largest LNG refinery in Iran. Brent crude has shot up to $111. This is bad news for oil and gas importers like India," he said. He warned that if Brent remains above $110 for an extended period, it could negatively impact India's macroeconomic indicators, GDP growth, and corporate earnings in FY27.
Institutional Activity and Market Volatility
On the institutional front, foreign portfolio investors remained net sellers, offloading equities worth Rs 2,714 crore on Wednesday. In contrast, domestic institutional investors provided some support to the market, purchasing shares worth Rs 3,253 crore. The market has been exceedingly volatile in response to developments on the war front and crude prices, with the last three days of recovery likely to be erased if the conflict escalation continues.
Potential Scenarios and Outlook
Dr. Vijayakumar added that a prolonged war is in no one's interest, and a sudden end to the conflict bringing crude prices sharply down cannot be ruled out. However, the fast-changing scenario means that this negative outlook may not necessarily play out. Indian equity benchmarks had ended higher on Wednesday, extending gains despite global caution, but the overnight developments reversed the trend.
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