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The Indian equity markets experienced a significant downturn on Thursday, with both the Sensex and Nifty indices plunging over 2%, marking their worst decline in nearly two months. This sharp drop was attributed to a confluence of factors, including escalating geopolitical tensions in West Asia, concerns about reduced trading volumes due to new regulations imposed by the Securities and Exchange Board of India (SEBI) on the F&O segment, and a generally weak global sentiment.
The S&P BSE Sensex shed 1,769.19 points, or 2.10%, closing at 82,497.10 points. Key contributors to this decline were L&T (-4.18%), Axis Bank (-4.12%), Tata Motors (-4.08%), Reliance (-3.91%), Maruti (-3.90%), and Asian Paints (-3.88%). Notably, JSW Steel was the sole gainer among the major stocks. The NSE Nifty-50 index mirrored this slump, dropping 546.80 points, or 2.12%, to settle at 25,250.10 points.
Analysts attributed the market downturn to several factors. Ameya Ranadive, a Senior Technical Analyst at StoxBox, pointed to weak global sentiment amidst escalating geopolitical tensions in the Middle East, coupled with disappointing domestic data, including lower GST collections and a dip in the Manufacturing Purchasing Managers' Index (PMI). He also highlighted the market’s reaction to the government’s appointment of three new external members to the Reserve Bank of India's (RBI) Monetary Policy Committee and the introduction of new SEBI rules aimed at curbing speculative trading in derivatives.
Vinod Nair, Head of Research at Geojit Financial Services, emphasized the impact of Iran's launch of ballistic missiles at Israel, which sparked fears of retaliation and an escalation of the conflict. This event, he noted, could potentially drive up oil prices and lead to inflationary pressures. He also highlighted the concerns regarding reduced trading volumes in the broader market due to the new SEBI regulations for the F&O segment. Lastly, he pointed to the redirection of foreign institutional investor (FII) funds towards China, which is seen as having more attractive valuations, putting additional pressure on Indian stocks.
The broader market mirrored the decline of the major indices, with the Midcap and Smallcap indices also recording losses. All sectoral indices ended in the red, with the Nifty Realty index experiencing the most significant drop at 4.3%. The Nifty Auto and Oil & Gas indices also fell by over 2%. This broad-based downturn reflected a pessimistic market sentiment, with the realty index being particularly impacted.
The current market situation underscores the sensitivity of the Indian equity markets to global geopolitical events, economic data, and regulatory changes. The ongoing tensions in West Asia, coupled with domestic economic concerns and the shift in FII investments, have created a challenging environment for investors. As the situation evolves, it remains to be seen how the Indian equity markets will respond in the coming days and weeks.
Source: Sensex, Nifty fall over 2% on war fears, curbs on F&O trading