Why is market falling today? Sensex falls over 450 points, Nifty below 24,450. 4 key factors

The Indian stock market slipped into red on Tuesday amid rising oil prices, falling rupee and other factors dampened investor sentiment.

Sensex dropped over 450 points to hit an intraday low of 78,070 while Nifty 50 dropped over 100 points to slip below 24,450. Broader markets were mixed, with Nifty Midcap 100 in the red and Nifty Smallcap 100 in the green.

UltraTech Cement, IndiGo, Power Grid, Axis Bank, Bharti Airtel, Eternal, Tata Steel and Asian Paints shares dropped 1-3% to lead losses on Sensex. Bucking the trend, HCLTech and Titan shares gained around 1% each.


Among the sectors, Nifty Financial Services, Nifty FMCG and Nifty Private Bank fell nearly 1% each to lead losses. Nifty IT however was up 0.35%. The overall market breadth turned negative, with NSE seeing 1,699 declines against 1,457 advances, while 112 stocks remained unchanged.

Here are four key factors pushing markets lower today.

1) US-Iran stalemate

Negotiations between the United States and Iran over a peace deal hit an impasse. US President Donald Trump responded with his own demands ​to Iran's conditions for a peace agreement, calling for Iran to pay compensation for those killed in wars, attacks and protests, in a rhetorical escalation likely to complicate efforts to reopen the crucial waterway.

2) Oil prices rise

As a result of the stalemate, oil prices rose as investors worries over prolonged closure of the Strait of Hormuz, a critical waterway where nearly a fifth of the world's oil and liquefied natural gas transmitted before the war began at the end of February.

Oil prices rallied over 5% overnight, and extended gains on Tuesday morning. Brent crude futures rose to $88 per barrel, while WTI Crude futures rose to $82 per barrel.

3) Rupee falls

The Indian rupee fell 8 paise to 95.38 against the US dollar in early trade on Tuesday, as traders assessed the rising oil prices. This comes after the currency declined 13 paise to settle at 95.30 against the American greenback on Monday.

“The recovery in energy prices remains an important near-term factor for USD/INR. Market focus now shifts towards the US CPI data due this week, which could influence expectations around the Federal Reserve’s monetary-policy path and consequently drive volatility in the Dollar Index. With Crude Oil recovering and the Dollar remaining sensitive to upcoming US inflation data, USD/INR is likely to remain range-bound but volatile,” said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities.


4) Bond yields rise

US Treasury yields increased, further dampening equity market sentiment. The yield on benchmark US 10-year notes increased to 4.721% while the 30-year bond yield rose to 5.268%. The yield on 2-year notes, which typically moves in step with Fed interest rate move expectations, rose to 4.251%. Rising bond yields typically make bonds more attractive to investors, which in turn can lead to some downtrend in markets.

What lies ahead for Dalal Street?

Rising Brent crude price continues to be an irritant for the market even as other fundamentals exhibit strength, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He noted that a significant pivot in the market is the FIIs turning buyers, encouraged by the better-than-expected Q1 results and stability in the rupee. These positives have the potential to keep the market resilient with a slight upward bias, he said, adding that robust domestic consumption can ensure the sustainability of earnings growth through FY27.

“Big FCNR (B) inflows can support the rupee, which, in turn, can facilitate more FII inflows. FIIs are doing a capital rotation away from the ‘chip trade’ in South Korea and Taiwan and are compensating for the under ownership in Indian stocks. This trend is likely to continue. Interestingly FIIs are investing in expensive stocks in sectors like telecom, renewable energy, capital goods and pharmaceuticals rather than attractively valued banking majors,” according to the analyst.

Technical view on Nifty

Nifty 50 continues to trade in a narrow consolidation band, with the lack of selling pressure keeping downside risks limited, said Anand James, Chief Market Strategist at Geojit Investments. As long as the 24,570-24,500 support zone remains intact, the index could make another attempt to surpass 24,730 and target 24,775.

The analyst however expects Nifty 50 to remain range bound as long as 24,400-24,775 band is held

(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)