Sensex falls over 700 points, Nifty below 23,900 as US-Iran launch fresh attacks, rupee tumbles to record low

Indian stock market tumbled on Tuesday, with Sensex and Nifty falling up to 0.7% as fresh escalations in the US-Iran War, along with the rupee at an all-time low, spooked investors, a day after brief optimism around West Bengal, Tamil Nadu and other state election results.

At 12:05, Sensex dropped over 700 points to trade at 76,550 level, while Nifty 50 declined around 200 points to trade above the 23,900 mark. Broader markets, however, outperformed, With the Nifty Smallcap 100 and Nifty Midcap 100 trading in the green with marginal gains.

IndiGo, Tech Mahindra, NTPC, Zomato-parent Eternal, Asian Paints and UltraTech Cement shares were the top losers on Sensex, declining around 1% each. Bucking the trend, M&M, Adani Ports and ITC traded in the green with marginal gains. India VIX, which measures volatility in the market, was down around 1% at 18.30.


Sectorally, Nifty PSU Bank and Nifty Private Bank indices declined up to 0.4% to emerge as the top losers, with the overall Nifty Bank index falling 0.34%. Nifty Pharma and Nifty Realty indices were up marginally. Around 321 stocks advanced on NSE, while 279 declined and 54 remained unchanged.

US-Iran war escalates

The US and Iran launched fresh attacks in the oil-rich Gulf region as they wrestled for control over the Strait of Hormuz. The US military on Monday said it had struck a vessel allegedly operated by "designated terrorist organisations" in the Caribbean, killing two people.

US President Donald Trump, meanwhile, resumed his series of threats, warning that Iran would be "blown off the face of the Earth" if it attacked US vessels involved in the operation 'Project Freedom'. "We're truly making America great again. It's... we're doing record, record business. We can't let Iran have a nuclear weapon. We hit all new highs, and I said we have to take care of business because we can't let that happen," Trump said on Monday.

Oil prices cool down

Despite the fresh escalations, oil prices cooled down. Brent crude futures dropped 1% to $113 per barrel, while WTI crude futures fell nearly 2% to $104.5 per barrel. While this is significantly lower than the four-year high levels recorded last week, oil prices still remain elevated, spooking investors about the prolonged closure of the Strait of Hormuz and its impact on India’s macroeconomics.

Rupee hits all-time low

The Indian rupee tumbled to a record low after US-Iran strikes in the Gulf rattled markets, erasing hopes for a resolution to the months-long conflict. The Indian currency dropped 0.3% to 95.39 per dollar, breaking the previous record low of 95.33 hit on Thursday last week. "Elevated oil prices are increasing India’s import bill and keeping inflation concerns high, limiting any recovery in the rupee," said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

FII turn net buyers

Foreign investors turned net buyers of Indian equities on Monday, buying shares worth Rs 2,836 crore. This comes after they remained strong net sellers of Indian shares for eight consecutive sessions, dampening sentiment in the market.

Global markets

Meanwhile, global markets remained mixed. Hong Kong’s Hang Seng declined over 1% on Monday morning. European markets closed in the deep red yesterday, with France’s CAC and Germany’s DAX dropping up to 2%.

Wall Street, meanwhile, saw the Nasdaq and S&P 500 close in the red yesterday.

What lies ahead?

The sentiment boost provided by the BJP’s electoral victory in West Bengal will not last, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He said that the market trend will be guided by developments in West Asia, particularly in the Strait of Hormuz.

“The resumption of hostilities in the Hormuz region and Brent crude again spiking to around $113 are headwinds for the market. Also, the US 10-year bond yield rising to 4.44% and the rupee sliding to the 95.23 level are unfavourable from the FPI flows perspective. Yesterday’s cash market buying by FIIs is unlikely to be the beginning of a trend. In the near term, the market will respond to Q4 results and management commentary,” he said.

(With inputs from agencies)
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