India’s equity market fell sharply on Thursday as investors rushed to book profit amid rising geopolitical tensions, following concerns over a potential conflict between the US and Iran and speculation of possible military action over the weekend. Snapping a three day winning streak, benchmark BSE Sensex fell 1,236.11 points (1.48%) to close at 82,498.14 while the NSE Nifty50 declined 365 points (1.41%) to 25,454.35.
Investors lost around Rs 8 lakh crore as the overall market capitalisation of BSE-listed firms came down to nearly Rs 464 lakh crore from Rs 472 lakh crore in the previous session.
“Sentiment weakened after the latest Fed minutes clouded the rate-cut outlook. This accompanied with a sharp rise in crude and US–Iran tensions heightened inflation and volatility concerns. INR weakness and subdued FII participation due to holidays further weighed on the market, alongside profit booking following the recent rally,” said analyst at Bajaj Broking.
Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services expect markets to remain cautious in the near term given escalating geopolitical risks and the possibility of oil supply disruptions. He added that any escalation involving Iran could impact shipments through the Strait of Hormuz, which would be particularly negative for India given its heavy dependence on crude imports from the region.
The US has issued fresh threats to Iran Tehran after a second round of nuclear talks in Switzerland, as Iran and Russia announced joint naval drills in the Sea of Oman. The situation tensed as President Donald Trump deployed two US aircraft carriers and thousands of troops to the Gulf region.
Reflecting the risk-off mood, global commodity prices moved higher, with Brent crude rising over 1%, while gold and silver gained 0.3% and 1%, respectively.
Sectorally, Realty, Media, and Auto led the losses, with all indices closing in the red. Broader markets also remained under pressure. The broader indices mirrored the performance of the benchmark indices, with the Nifty Midcap index declining 1.6% and the Nifty Small-cap index falling 1.3%.
Ajit Mishra – SVP, Research, Religare Broking said that the decline has erased the gains of the past three sessions, and a decisive break below the 25,400 level could further weaken sentiment, potentially dragging the index toward the 25,100 gap area.
“On the sectoral front, even a single session of profit booking in the banking index significantly impacted overall market mood, as other sectors failed to provide meaningful support and also closed lower. We therefore recommend maintaining a cautious stance and waiting for signs of stability before initiating fresh positions,” added Mishra.