Why Are Indian Markets Plummeting? Geopolitical Tensions and Oil Prices at Play
Market Overview
Mumbai: The equity markets, represented by the Sensex and Nifty, faced a significant decline of nearly 1% on Friday, influenced by weak global market trends and a surge in Brent crude oil prices following Israel's military actions against Iran.
This marks the second consecutive day of losses, with the 30-share BSE Sensex plunging by 573.38 points, or 0.70%, closing at 81,118.60. At one point during the morning session, it fell by 1,337.39 points, or 1.63%, reaching 80,354.59.
The 50-share NSE Nifty also saw a drop, losing 169.60 points, or 0.68%, to settle at 24,718.60.
Investor sentiment turned cautious as fears of escalating conflict between Israel and Iran grew, leading to a retreat from riskier investments and notable foreign fund withdrawals.
Among the companies listed on the Sensex, major declines were observed in Adani Ports, ITC, State Bank of India, IndusInd Bank, HDFC Bank, Titan, Kotak Mahindra Bank, and UltraTech Cement.
Conversely, Tech Mahindra, Tata Consultancy Services, Sun Pharma, and Maruti managed to record gains.
Brent crude oil prices surged by 7.44%, reaching USD 74.52 per barrel.
Asian markets reflected this trend, with South Korea's Kospi, Japan's Nikkei 225, Shanghai's SSE Composite, and Hong Kong's Hang Seng all closing lower.
European markets also showed declines.
In contrast, US markets ended positively on Thursday.
"The Indian equity markets are under pressure due to unfavorable global signals and foreign institutional selling. The recent military actions by Israel against Iran have heightened geopolitical tensions, leading to increased risk aversion among investors. Although India's Consumer Price Index for May fell below the Reserve Bank of India's comfort zone, providing a positive macroeconomic indicator, it was overshadowed by external challenges," stated Vinod Nair, Head of Research at Geojit Investments Limited.
"Brent crude prices have risen to nearly USD 76 per barrel, the highest this year, raising concerns about inflation if these tensions continue," he added.
Data from exchanges indicated that Foreign Institutional Investors (FIIs) sold equities worth Rs 3,831.42 crore on Thursday.
In a tragic incident, an Air India flight bound for London crashed shortly after takeoff from Ahmedabad, resulting in the loss of 241 lives among the 242 passengers and crew members on board, with one individual surviving.
On Thursday, the BSE Sensex had already dropped by 823.16 points, or 1%, closing at 81,691.98, while the Nifty fell by 253.20 points, or 1.01%, to 24,888.20.