MUMBAI: India’s equity market nosedived on Wednesday with benchmark indices - BSE Sensex and NSE Nifty50 - crashing more than 2% each. The selling in global equities, including India, has picked up pace amid increased chances of a prolonged full-blown war in West Asia as the US-Israel coalition and Iran continue to exchange missiles, and its impact on oil prices which has risen sharply in recent sessions.
Sensex crashed up to 1,800 points, or 2.2%, in the early hours of Wednesday, to an intraday low of 78,443.20, while the Nifty 50 plunged over 550 points, or 2.3%, to the day's low of 24,305.40. This market downturn echoed global trends, with Japan’s Nikkei 225 and South Korea’s Kospi suffering the steepest declines.
Meanwhile, the rupee breached the psychological 92 mark, hitting a record low on Wednesday. Investors lost about Rs 12 lakh crore early Wednesday as the overall market capitalisation of BS-listed firms plummeted to Rs 445 lakh crore in intraday trade.
The fresh selling arises amid the closure of the Strait of Hormuz which carries about 20% of the world's crude. Disruptions in Gulf oil tanker movements and refinery attacks have triggered a sharp surge in energy prices, posing major headwinds for India and the global economy.
Since the West Asia crisis that began on Saturday, crude prices have shot more than 15% and the global benchmark Brent is quoting $82.60% a barrel on Wednesday while the Iranian attack on the Qatari LNG facility has led to gas prices surging 55% in Europe.
The important trade route has come to a standstill as Iran continues to rain missiles and drones across West Asia. The action by Iran comes after US and Israeli forces targeted key Iranian sites over the weekend, resulting in the confirmed death of Supreme Leader Ayatollah Ali Khamenei.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments said that with the war escalating and crude rising, markets are going into a period of heightened uncertainty. The NSE India Volatility index jumped 21% to 20.70, highlighting a sharp increase in traders' anxiety and a near-term price swing.
“Nobody knows how long this conflict will go on and what will be the extent of the havoc it could wreck. From the perspective of India, which relies on imports for around 85% of her oil requirements, the real concern is the potential inflation and its consequences on economic growth,” said Vijayakumar.
He added that from the market perspective, the impact of potentially widening trade deficit, depreciating currency, higher inflation and perhaps lower growth is the real issue. If this fear materialises, corporate earnings will be impacted. This is the fear in the market.
Market experts had earlier warned that there would be more pain for the Indian market if tensions in West Asia persist for weeks as this could push crude oil prices to the $90-$100 per barrel mark.