The Indian stock market continued witnessing selling pressure for the third consecutive session on Wednesday, 9 September, tracking weak global cues. The Sensex dropped more than 650 points, or nearly 1%, to drop to an intraday low of 74,923, while the NSE barometer Nifty 50 also dropped nearly 1% to the day’s low of 23,467 during the session. In these three sessions, the Sensex and the Nifty 50 have declined by 2% each.
Why is the stock market down today?
Here are three key factors behind the fall in the domestic stock market:
1. Crude oil prices near $100
Crude oil prices have been on an uptrend, weighing on market sentiment. Brent crude trades near $100 per barrel, fuelling concerns over a potential inflation flare-up, monetary tightening, and distortion in India’s growth-inflation dynamics.
India is the world’s oil-importing country. So, higher oil prices can inflate the country’s dollar-denominated import bill and can put pressure on the trade balance and the rupee. The opened 5 paise lower at 94.87 against the US dollar on Wednesday.
2. US-Iran tensions escalate
Escalating are keeping investors on tenterhooks. According to Reuters, US forces struck multiple Iranian oil tankers linked to Iran’s Revolutionary Guard Corps (IRGC) in response to further attempted missile attacks on a US Navy warship.
According to Al Jazeera, the US military said it has destroyed five Iranian crude oil carriers following the IRGC’s ballistic missile attacks on a US Navy warship.
The US-Iran conflict has now stretched for over 6 months, and there is no resolution in sight in the near term. A prolonged period of conflict can keep oil prices higher for longer, impacting the country’s overall economic growth and the profitability of India Inc.
3. The IPO factor
Experts believe the deluge of IPOs is sucking up liquidity that would otherwise go to the secondary market. On the BSE, as many as 146 IPOs have been launched this year.
“Two strong headwinds are impacting the market now. One, Brent crude around $100 amidst escalating US-Iran tensions is weighing on the economy. Two, the booming IPO market is sucking liquidity out of the market, resulting in a sustained downtrend in the Nifty,” V K Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
“Perhaps, the latter is impacting the market more than the former. The listing gains from IPOs, which have increased to about 22% since June, are driving investors- both retail and institutional- into the IPO market. This is understandable since Nifty return YTD is negative 9.5%,” Vijayakumar said.
Top contributors to the falling market
Around 11 AM, Infosys, HDFC Bank, ICICI Bank, TCS, and Reliance were the top drags on the Sensex.
On the Nifty, Infosys, HDFC Bank, ICICI Bank, Bharti Airtel, and Reliance were the top five drags.
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