Sensex Plummets 1,236 Points as US-Iran Tensions Roil Markets

Market Rout Ends Three-Day Rally

Indian equity markets experienced a sharp downturn on Thursday, bringing a three-day gaining streak to an abrupt halt. The benchmark indices witnessed a broad-based sell-off as escalating geopolitical tensions between the United States and Iran soured investor sentiment globally. The 30-share BSE Sensex plunged 1,236.11 points, or 1.48 per cent, to close at 82,498.14. Similarly, the 50-share NSE Nifty 50 slumped 365 points, or 1.41 per cent, to settle at 25,454.35, breaching the key 25,500 level.

Geopolitical Jitters and Crude Oil Surge

The primary catalyst for the market's decline was the heightened tension in the Middle East. Concerns that a potential conflict could disrupt oil supply through the Strait of Hormuz pushed global crude prices higher. Brent crude, the international benchmark, rose 1.02 per cent to trade at $11.07 per barrel, reaching its highest point year-to-date. The surge in oil prices amplified inflationary fears in an import-dependent economy like India, further pressuring market sentiment. Analysts noted that the uncertainty surrounding the US Federal Reserve's interest rate cut trajectory also contributed to the cautious mood.

Broad-Based Selling Pressure

The sell-off was not confined to a few sectors but was widespread across the market. Investor wealth eroded by approximately ₹3 lakh crore during the session. Heavy selling was observed in banking, metal, auto, and FMCG stocks. Among the Sensex constituents, major laggards included IndiGo, Mahindra & Mahindra, UltraTech Cement, Trent, Bharat Electronics Ltd, Adani Ports, Kotak Mahindra Bank, Reliance Industries, Tech Mahindra, ITC, and PowerGrid. The negative sentiment also impacted the broader market, with smallcap and midcap indices plunging significantly, indicating a risk-off approach among investors.

Analyst Commentary on Market Volatility

Market experts attributed the sharp fall to a combination of global and domestic factors. Vinod Nair, Head of Research at Geojit Investments Ltd, stated, "The bears took charge of the Indian market as rising geopolitical tensions between the US and Iran unsettled global sentiment, leading to a broad-based sell-off." He also pointed out that low participation from Foreign Institutional Investors (FIIs) due to the Lunar New Year holidays in key Asian markets, coupled with a regional banking holiday in India, intensified the sell-off. The continued weakness in the Indian Rupee against the US dollar also weighed on the market.

Key Market Data

The table below summarizes the performance of the key Indian indices at the close of trading on Thursday.

Foreign Investor Activity and Global Cues

While Foreign Institutional Investors (FIIs) were net buyers on the previous day, purchasing equities worth ₹1,154.34 crore on Wednesday, the broader trend has indicated caution. Recent data showed significant FII outflows from specific sectors like IT earlier in the month. On the global front, Asian markets presented a mixed picture. While South Korea's Kospi and Japan's Nikkei 225 closed higher, markets in Hong Kong and China were shut for holidays. European markets were trading lower, reflecting the cautious global sentiment.

Technical Outlook and Market Path Forward

From a technical standpoint, the Nifty 50's sharp fall has put its crucial 200-day moving average under threat. The breach of the 25,500 mark is seen as a significant bearish signal. Analysts suggest that market volatility is likely to remain elevated in the near term. The trajectory will be heavily influenced by developments in the US-Iran situation, global crude oil price movements, and upcoming economic data. Investors are advised to remain cautious as any pullback rallies could be short-lived until the geopolitical landscape stabilizes.

Conclusion

Thursday's trading session was a stark reminder of the market's vulnerability to global geopolitical events. The significant drop in the Sensex and Nifty, driven by US-Iran tensions and rising oil prices, erased the gains of the past three days. With uncertainty prevailing, the market's direction in the coming sessions will depend on how these international developments unfold and their subsequent impact on global economic stability.