Stock markets opened lower on Wednesday as investors remained worried about rising crude oil prices, the falling rupee, foreign investor selling and growing tensions in West Asia.
The BSE fell 389.19 points, or 0.52%, to 74,811.66 in early trade, while the NSE Nifty50 dropped 107.90 points, or 0.46%, to 23,510.10 as of 9:39 am.
The market weakness came despite some support from IT stocks, with broader sentiment remaining cautious due to global uncertainty and pressure on India’s economy.
One of the biggest reasons
The rupee fell to a fresh lifetime low of 96.8650 against the US dollar on Wednesday, crossing its earlier record low of 96.6150 touched in the previous session.
The currency has now weakened around 6% since the conflict began in late February.
The falling rupee is worrying investors because it increases India’s import costs, especially imports, and raises inflation risks for the economy.
A weaker rupee also makes foreign investors nervous, often leading to further selling in equity markets.
Another major pressure point for markets remains crude oil prices.
Brent crude was trading around USD 110.70 per barrel, while WTI crude stood near USD 107.77 per barrel on Wednesday morning.
Although oil prices eased slightly during the session, they continue to remain at elevated levels because of concerns around the US-Iran conflict and possible disruptions in global energy supplies.
Investors are closely tracking developments after US President renewed threats to strike Iran again.
The prolonged conflict has pushed global energy prices sharply higher over the past few months, creating worries around inflation and economic growth worldwide.
For India, which imports nearly 85% of its crude oil needs, high oil prices directly affect inflation, the trade deficit and the rupee.
Foreign institutional investor selling has also remained a key reason behind market weakness.
Overseas investors have pulled out more than USD 22 billion from Indian stocks and bonds since the Iran war began, according to available data.
Analysts say rising US bond yields, expensive crude oil and concerns around India’s economic outlook have made foreign investors cautious about emerging markets like India.
Persistent foreign selling has also added pressure on the rupee and increased volatility in equity markets.
Asian markets also traded lower on Wednesday as investors globally reacted to rising US bond yields and geopolitical uncertainty.
Higher US Treasury yields have reduced risk appetite globally, as investors move money towards safer dollar assets offering better returns.
This has hurt emerging market equities, including India.
Most sectoral indices were trading in the red during early trade.
Nifty PSU Bank fell 1.14%, while Nifty Realty dropped 1.32%. Nifty Media declined 1.89% and Nifty Auto slipped 0.86%.
Banking, consumer and metal stocks also remained under pressure.
However, some defensive sectors showed resilience. Nifty Pharma rose 0.55%, while Nifty Healthcare gained 0.33%.
IT stocks also managed to stay slightly positive, with Nifty IT rising 0.31%.
Among Sensex and Nifty stocks, Tata Steel was among the biggest losers, falling 2.51%.
Other major losers included BEL, down 1.69%, Maruti, down 1.33%, SBI, down 1.11%, M&M, down 1.41%, Eternal, down 1.11%.
Banking stocks also remained weak, with Kotak Mahindra Bank, ICICI Bank and HDFC Bank trading lower.
On the positive side, Infosys, TCS, Reliance Industries and Tech Mahindra offered some support to the market.
India VIX, often called the market fear gauge, rose 3.22% to 19.28.
A rising VIX usually indicates growing nervousness among traders and expectations of higher market volatility in the coming sessions.
Analysts say investors are likely to remain cautious until there is more clarity around:
Markets are currently dealing with multiple global and domestic pressures at the same time.
High crude oil prices are increasing inflation risks, the rupee is falling to fresh lows, and foreign investors continue to pull money out of Indian markets.
At the same time, rising US bond yields and geopolitical uncertainty are keeping global sentiment weak.
Unless crude oil prices cool sharply or tensions in West Asia ease meaningfully, analysts believe Indian markets may continue to remain volatile in the near term.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)