The Indian stock market slipped into the deep red on Monday, with the Sensex and Nifty falling around 1% each as soaring oil prices and bond yields, amid the escalating Iran-US conflict, spooked investors.
The Sensex plunged over 850 points to trade below 73,050, while the Nifty 50 dropped more than 250 points to slip below 22,900 level. The sharp sell-off wiped out nearly Rs 5 lakh crore from the total market capitalisation of BSE-listed companies, bringing it down to around Rs 477 lakh crore.
All 30 constituents of Sensex traded in the red, with Bajaj Finance, Kotak Mahindra Bank and HDFC Bank shares falling nearly 2% each to lead losses on the benchmark index. Bajaj Finserv, Hindustan Unilever, BEL, M&M, L&T, Eternal, ICICI Bank, Titan and a few other stocks fell more than 1% each.
The selloff was broadbased, with Nifty Smallcap 100 and Nifty Midcap 100 indices falling more than 1% each. India VIX, which measures volatility in the market, rallied nearly 13% to near 14.
All sectoral indices traded in the red, with Nifty Auto, Nifty Financial Services, Nifty FMCG, Nifty PSU Bank, Nifty Metal, Nifty Private Bank and Nifty Realty dropping over 1% each. The overall market breadth turned strongly negative, with NSE seeing 2,259 declines against 759 advances, while 116 stocks remained unchanged.
Here are the key factors pushing the market down today.
1) Iran-US conflict escalates
US President Donald Trump rejected Iran's proposal for a seven-day ceasefire and reopening of the Strait of Hormuz. Speaking to reporters on Saturday, Trump forcefully stated, "I reject this agreement. They want an agreement to be made under which the Strait of Hormuz is immediately opened, because they are severely failing.”
Meanwhile, Iranian President Masoud Pezeshkian said that Iran will remain resolute and not retreat in the face of the United States and Israel. “We stand firm with strength, we are at the service of our people, we will stand until our last breath, and we promise that as long as we have life in our bodies, we will be honest servants to the people; you have put us to shame, I do not consider myself worthy of your presence, I am your servant,” he said.
With the Iranians holding firm in the face of Trump's threat of annihilation and his rejection of the peace deal may have spooked investors who will keenly watch developments in the oil-rich Middle East.
As a result of the latest developments in the Middle East, oil prices jumped 2% to near $107 per barrel as market priced in further disruption in oil shipments. Brent crude futures were trading near $107 per barrel while WTI Crude futures traded close to $94 per barrel.
JPMorgan said it had lost visibility on the direction of oil prices and, for the first time since the Iran war began in February, no longer had a clear baseline scenario for the market. The bank said escalating tensions were adding to concerns over an already worsening supply shock.
"We simply don't know how to model the endgame," JPMorgan analysts said, pointing to the uncertainty over how the conflict could evolve. When the conflict began, the bank had assumed there were economic thresholds that the US administration would not cross. Six months into the war, JPMorgan said, many of those thresholds have been crossed, while there remains no clear exit strategy.
