The situation on Dalal Street worsened on Monday as the main indices crashed in early trade amid rising global tensions and heavy selling pressure.
At 9:18 am, the BSE Sensex stood at 76,741.29, down 2,177.61 points (-2.76%), while the Nifty 50 fell 647.60 points to 23,802.85. The decline reflects a sharp deterioration in investor sentiment as global risks intensify and foreign investors continue to pull money out of Indian equities.
The sell-off was broad-based, with banking, IT, and metal stocks among the worst hit in early trade.
A key trigger behind the sharp fall is the escalating conflict in the Middle East, which has entered a more volatile phase in recent days. The developments have raised concerns about global stability and potential disruptions to energy supplies.
Periods of geopolitical uncertainty often push investors toward safer assets and away from equities. The rising tensions have therefore weighed on global markets, with Indian equities also feeling the pressure.
Another factor weighing on markets is the sharp rise in crude oil prices. Oil has surged on concerns that the ongoing conflict could disrupt supply routes and tighten global availability.
For India, which relies heavily on imported crude, higher oil prices can increase the import bill and raise inflation risks. That in turn could delay expectations of interest-rate cuts and dampen overall investor sentiment.
Dr. Ravi Singh, Chief Research Officer at Master Capital Services Ltd., said the recent turbulence in Indian equities is being driven by a mix of geopolitical risks, rising oil prices and sustained foreign investor selling.
He said the recent turbulence in Indian equities can largely be attributed to three key factors.
“Firstly, the intensifying conflict in the Middle East has entered a more destructive phase over the past week, raising concerns about global stability and energy supply disruptions. Secondly, crude oil prices surged nearly 25% during the week on supply-side fears, reigniting inflationary concerns across global markets and weighing on investor sentiment. Lastly, the market continued to witness persistent outflows from foreign institutional investors, further adding to the downward pressure on domestic equities,” Singh added.
Persistent selling by foreign institutional investors has also added to the downward pressure on the market. Global funds have continued to reduce exposure to Indian equities amid rising uncertainty and risk aversion.
Because foreign investors hold significant stakes in several large-cap companies, sustained outflows can amplify market declines and drag benchmark indices lower.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the spike in crude prices could have significant economic implications if the geopolitical tensions continue.
“Brent crude has spiked above $115 delivering a big oil shock to economies and markets. Big oil importers like India will be hit hard if the West Asian conflict lingers long and crude price remains high. The market will price-in the economic consequences of this oil shock. Inflation will certainly move up whether the oil price hike is passed on to consumers or not.
The unknown factor now is how long the conflict will last. This uncertainty will also weigh on FIIs who have again turned aggressive sellers in India after the short bout of buying in February.
The lesson from history is that the impact of geopolitical issues like conflicts on markets do not last long. Therefore, investors have to be patient.
Domestic consumption segments like banking and financials, automobiles, telecom and cement will not be impacted much by the crisis. Defense and pharmaceuticals will be relatively resilient. Long-term investors with high risk appetite can nibble at stocks in these strong themes.”
Analysts say market volatility could remain elevated in the near term as investors track geopolitical developments, crude oil movements and foreign investment flows.