The benchmark indices had slipped over 1% each in the morning, with Sensex crashing over 1,200 points and Nifty falling below 23,800 briefly. However, markets recovered some losses by afternoon. At close, Sensex was down 583 points at 76,913l, while Nifty was down over 180 points at 23,998. The sharp drop erased nearly Rs 5 lakh crore from the total market capitalisation of all companies listed on BSE, pulling it down to Rs 464 lakh crore.
Zomato-parent Eternal, Hindustan Unilever (HUL), Tata Steel, UltraTech Cement, M&M, Trent, L&T and Axis Bank shares were the top losers on Sensex, falling nearly 2-3%. Bucking the trend, Sun Pharma shares jumped 2% to emerge as the top gainer.
The sharp selloff in the stock market was broad-based, spilling over to small and midcap counters as well. The Nifty Smallcap 100 index declined 0.5%, while the Nifty Midcap 100 index tumbled nearly 1%. This came as India VIX, which measures volatility in the market, jumped around 6% to 18.46.
Nifty Metal and Nifty PSU Bank index declined around 2% each to emerge as the top sectoral loser. Nifty Pharma and Nifty IT meanwhile closed in the green. Around 1,976 stocks declined on NSE, while 1,295 advanced and 98 remained unchanged.
Here are the key factors impacting markets today:
1) Trump’s ‘extended blockade’ warning
US President Donald Trump said that the US blockade of Iranian ports could last months as peace talks remained stalled. While Iran has reportedly submitted a fresh peace proposal to end the weeks-long War, Trump is not satisfied. The Wall Street Journal said he had told national security officials to prepare for a prolonged blockade to compel the Islamic Republic to give up its nuclear programme.“The blockade is somewhat more effective than the bombing. They are choking like a stuffed pig. And it is going to be worse for them. They can’t have a nuclear weapon,” Trump told Axios. His latest comments further spooked investors.
2) Oil prices cross $120/barrel
Oil prices surged amid escalating tensions, crossing $120 per barrel for the first time since Russia’s invasion of Ukraine in 2022. Brent crude futures rose around 4% to $123 per barrel in Thursday morning trade.
After comfortably falling below the $100 per barrel mark earlier this month, oil prices moved back above the crucial level last week as fresh attacks near the Strait of Hormuz raised concerns about supply disruptions.
3) Fed’s hawkish commentary
The US Federal Reserve kept its policy rates unchanged, with the decision being its most divided since 1992, as three officials dissented over guidance that still signalled a bias towards easing.
“Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” the Committee said, adding that it remains attentive to risks on both sides of its dual mandate of growth and inflation.
4) Rupee weakens to all-time low
Rupee declined to a fresh all-time low of 95.07 against the US dollar on Thursday. Later, it pared some losses to close at 94.9050. Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities, had warned that sustained FII outflows and elevated crude prices are pressuring the currency. “Higher oil prices are significantly increasing India’s import bill and inflation risks, limiting any meaningful recovery in the rupee,” he said. “The trend remains weak, with the currency consistently facing selling pressure on rebounds, indicating a lack of strong support at higher levels,” he added.
5) Global markets in red
Global markets mostly remained in the red as oil prices soared. Japan’s Nikkei tumbled nearly 1.3%, while Hong Kong’s Hang Seng and South Korea’s Kospi fell around 1.4% each, although China’s Shanghai Composite closed nearly flat in the green.
European markets remained mixed, with UK’s FTSE rising over 1%. France’s CAC fell 0.5% while Germany’s DAX gained 0.18%. Wall Street, however, closed nearly flat, with the Nasdaq ending the session in the green with marginal gains.
6) FII selling continues
Foreign investors remained net sellers of Indian equities on Wednesday, net selling shares worth Rs 2,469 crore, according to provisional data available on NSE. FIIs have now been net sellers of Indian equities for the sixth consecutive session.
While this does not reflect their trading activity today, sustained FII selling dampens investor sentiment and fuels the selloff in the market.
7) Bond yields soar
US Treasury yields rose to a one-month high after the Fed’s hawkish signal of growing inflation concerns. The yield on benchmark US 10-year notes rose 7.6 basis points to 4.43%, from 4.354% late on Tuesday, while the 30-year bond yield rose 5.7 basis points to 5.0011%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 10.7 basis points to 3.951%, from 3.844% late on Tuesday.
Exit polls lead to volatility
Exit polls across four states and one union territory indicate a strong maiden electoral win for the Bharatiya Janata Party (BJP) in West Bengal, while incumbents are likely to retain power in Tamil Nadu, Assam and Puducherry, JM Financial said in its latest note. Kerala also appears set for a regime change, with the Congress-led United Democratic Front (UDF) likely to unseat the Left Democratic Front (LDF), which has ruled the state for the last 10 years, the domestic brokerage added.
Analysts say that exit polls often trigger short-term volatility, although their broader impact tends to be limited. Vishnu Tripathi, AVP at Garud Investment Managers, noted that such developments lead investors to reassess positions based on expected policy direction at the state level.
In this context, investors remember the sharp market volatility around the 2024 General Elections. After voting concluded, exit polls predicted a landslide victory for the National Democratic Alliance (NDA), led by Prime Minister Narendra Modi. They projected that the BJP would win more than 272 seats in the 543-member Parliament, while the NDA could win up to 370 seats. This had pushed markets sharply higher on Monday (June 3, 2024), a day before the correction.
As the session began on June 4, 2024, investors panicked as early trends in the actual results diverged sharply from expectations. The BJP failed to reach the halfway mark on its own, and the NDA won 293 seats to form the government, although with fewer seats than expected. Sensex and Nifty fell nearly 6% each on June 4, 2024, wiping off a significant portion of investors’ wealth.
(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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