On Thursday, a shocking fall was seen in the Indian stock market. Due to this, the Sensex has fallen by more than 1,500 points. This fall has caused a loss of about ₹7 lakh crore in market capitalization. The main reason for this is the increasing tension in the Middle East and the sharp rise in crude oil prices.
Main Factors Behind The Decline In The Market
The Nifty 50 index followed the Sensex's decline, which fell nearly 400 points as investors reacted to global cues after a halt in trade due to holidays. Key stocks, especially Reliance Industries, ICICI Bank, and HDFC Bank, also declined. Reliance Industries was the biggest drag on Nifty's decline, accounting for a fall of nearly 50 points. HDFC Bank and ICICI Bank also followed suit, impacting the overall market sentiment.
Geopolitical Tensions Escalate
The main reason behind the decline in the market is believed to be the ongoing war between Iran and Israel. Recent missile attacks by Iran on Israeli bases have raised fears of a wider war. According to these reports, oil supplies from that region may be disrupted. Reports of Israeli military casualties in response to Iranian actions have further increased these concerns, further increasing tension in global markets.
As Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out, "If Israel attacks any oil installation in Iran, the situation will change, leading to a sharp jump in crude oil prices. This scenario poses significant risks for oil-importing countries like India."
Rising Crude Oil Prices
The surge in crude oil prices has further added to the market's troubles. Brent crude prices briefly rose above $75 a barrel, while West Texas Intermediate prices reached $72. Both have seen a rise of more than 5% in the last few days. For a country like India with a huge population, which is heavily dependent on imported oil, rising crude oil prices can increase pressure on the country's economy. This can lead to a rise in the country's financial deficit. Investors are particularly cautious given the potential impact on the country's economic stability.
Regulatory Changes Raise Market Concerns
Adding to this global turmoil, recent regulatory changes made by the Securities and Exchange Board of India (SEBI) in the futures and options (F&O) segment have raised concerns among traders. The new measures, including limiting weekly expiries to one per exchange and increasing contract sizes, could dampen retail sentiment and reduce trading volumes. Analysts suggest this uncertainty about trade dynamics has contributed to the downward market pressure amid broader geopolitical tensions.
What Lies Ahead?
Experts are advising caution as the market grapples with these challenges. Dr. Vijayakumar advises investors to invest a portion of their portfolio in defensive sectors such as pharmaceuticals and fast-moving consumer goods (FMCG) to minimize potential losses. Rahul Kalantri, Vice President Commodities, Mehta Equities, emphasized that crude oil volatility will remain an important factor to keep an eye on, especially if geopolitical tensions escalate further.
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