Sensex Cracks Over 1600 Points, Investor Wealth Worth Rs 8 Lakh Cr Wiped Off; Why Is Market Falling?

The domestic equity market took a sharp hit at the open on October 3, with both the Sensex and Nifty 50 plunging over 1 percent each, pressured by mixed global cues and rising geopolitical tensions in the Middle East.

At 12:00 PM, the BSE Sensex was at 82,936, down 1,330 points, or 1.58 per cent, while the Nifty 50 was at 25,392, down 404 points, or 1.57 per cent.

The market capitalisation of all listed companies on BSE declined by Rs 7.2 lakh crore to Rs 467.67 lakh crore.

Concerns over a potential escalation in the Middle East grew after Iran launched ballistic missiles at Israel earlier in the week, fueling fears that oil supplies from the region could be disrupted if the conflict intensifies.

The India VIX, often referred to as the market’s fear gauge, spiked more than 8 percent, reaching 13.

Here are the key factors behind today’s meltdown

Iran-Israel Tensions

Indian stocks declined on Thursday amid rising concerns over the escalating hostilities between Iran and Israel. Reports indicate that the Israeli military has confirmed the deaths of eight soldiers, including a team commander, during ground operations in southern Lebanon.

This escalation follows Iranian missile attacks targeting Tel Aviv, with Israel’s military chief warning of an imminent response.

Crude Oil On The Rise

Oil prices increased amid concerns that escalating tensions in the Middle East could threaten supplies from major producers. Brent crude briefly surpassed $75 per barrel, while West Texas Intermediate topped $72, with both benchmarks rising nearly 5% over the past three days.

A rise in oil prices is a negative for importers of the commodity like India, as crude contributes significantly to the country’s import bill.

“The situation will change if Israel attacks any oil installations in Iran which will trigger a huge spike in crude. If it happens, it can turn out to be more damaging for oil importers like India. Therefore, investors should watch the emerging situation very closely,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Sebi Tightens F&O Measures

The recent decision by market regulator Sebi to tighten rules in the futures and options (F&O) segment has also contributed to the decline in equity markets today. Analysts stated that these new measures, which include limiting weekly expiries to one per exchange and increasing contract sizes, may dampen retail sentiment and reduce trading volumes.

This uncertainty around trading dynamics has likely fueled investor concerns, adding to the market’s downward pressure amid broader geopolitical tensions.

The Chinese Factor

Investors in India are increasingly worried about the resurgence of Chinese stocks, which have underperformed in recent years. Following the announcement of economic stimulus measures by the Chinese government last week, analysts predict sustained growth in Chinese stocks, prompting a potential outflow of funds from India.

The SSE Composite index rose 8% on Tuesday and has gained over 15% in the past week. As a result, foreign institutional investors have withdrawn Rs 15,370 crore from Indian equities in the last two trading sessions.

Nifty Technical

On the Nifty 50, top gainers included Tech Mahindra, NTPC, Tata Steel, ONGC, and JSW Steel, with gains of 0.2-2 percent. In contrast, Tata Motors, Wipro, Asian Paints, Eicher Motors, and BPCL were the biggest laggards, each dropping 2-3 percent.

On the technical side, Deepak Jasani, Head of Retail Research at HDFC Securities said that Nifty 50 could face resistance from the 25,956-26,011 band and find support at 25,446 in the near term.