Why is market falling today? War woes, oil spike and 4 other factors behind Rs 5 lakh cr D-Street rout

The Indian stock market fell sharply on Friday, with benchmark indices Sensex and Nifty falling around 1% each as soaring crude oil prices, surging bond yields and other factors spooked investors.

Sensex dropped over 740 points to 74,160 while Nifty 50 fell 264 points to 23,231 during Friday's session. The losses wiped off more than Rs 5 lakh crore from the total market capitalisation of all companies listed on BSE within minutes from opening, dragging it down to Rs 478 lakh crore.

M&M, Bajaj Finance, IndiGo, Tata Steel, UltraTech Cement and Axis Bank shares dropped around 2% each to lead losses on Sensex, while L&T, Eternal, Kotak Mahindra Bank, Titan, Sun Pharma and HDFC Bank shares fell over 1% each. Bucking the trend, Tech Mahindra and Infosys shares gained up to 1%.


Broader markets plunged deeper, with Nifty Midcap 100 and Nifty Smallcap 100 indices falling 1.3% each. This came as India VIX, which measures market volatility, jumped more than 6% to cross 12.5.

All sectoral indices traded in the red, with Nifty Realty crashing more than 3.5% and Nifty Metal plunging around 3%. Nifty Auto, Nifty Financial Services, Nifty Consumer Durables and several other indices traded 1-2% lower. The overall market breadth turned sharply negative, with NSE seeing 2,389 declines against 511 advances, while 88 stocks remained unchanged.

Here are the key factors pushing the market down today:

1) Iran-US conflict escalates

The conflict between Iran and the US sharply escalated after Iran-aligned Houthis seized control of Yemen's port of Mocha on Thursday. US President Donald Trump warned that the country may hit Iran's Pickaxe Mountain, located near its heavily damaged Natanz uranium enrichment facility, and ⁠said the war would likely last beyond the November midterm elections.

Iran meanwhile said it had attacked 10 ships near the strait on Wednesday, after the US hit five Iranian oil tankers. Iran's Islamic Revolutionary Guard Corps said it would escalate its response to any further attacks.

2) Oil prices soar to multi-month highs

As a result of the fresh escalations in the Middle East conflict, oil prices surged as the biggest spike in attacks on shipping since the Iran war began hiked worries among traders about further disruptions to already tight supplies.

Brent crude futures hit their highest level since May, rising more than 6% to cross $108 per barrel, while US WTI crude futures crossed $100 per barrel for the first time since May. "With prospects for a definitive resolution to the Iran conflict dimmed and Brent crude prices recently topping $100 for the first time since July, crude oil markets are now settling into a prolonged new normal where disruption risk is persistent, not episodic," Reuters quoted a new analysis by S&P Global Energy as saying.

3) Bond yields surge

The 10-year US Treasury yield surged to 4.97%, the highest level since late 2023. Investors now worry if the bond yield crosses the key 5% mark, a level briefly breached three years ago. The yields on 30-year US Treasury notes also hit their highest levels since 2007 at 5.38%, with the ​selloff in bonds spreading across the globe.

Analysts have pointed out that if the yield on 10-year notes crosses the key 5% mark, it can trigger a sharper selloff across global markets. “A correction in global equity market is likely, but the timing is hard to predict,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Indian 10-year bond yields also joined the rally, with ⁠the ⁠benchmark 10-year bond ​yield surpassing 7% to ​a more than three-month high. Rising bond yields typically make the debt market more attractive to investors, which often leads to a downturn in the equity market.

Also read | Bigger market crash ahead? Analysts weigh how Sensex, Nifty may react if US 10-year bond yield touches 5%

4) Rupee falls

The rupee fell 27 paise to 95.79 against the US dollar in early trade. The Indian currency then pared some losses as the RBI may have now intervened ​in the foreign exchange market to limit the rupee's further ⁠fall ⁠as a sharp rise in ​oil prices and US bond yields ​pressured the currency, Reuters reported.

“Higher oil prices are raising concerns over India’s import bill and dollar demand, keeping pressure on the currency. Going ahead, crude prices and broader dollar movement will remain key triggers for the rupee. The rupee range can be seen between 95.20–95.80,” said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities.

5) IPO boom

The booming Indian IPO market is the centre of attraction for investors now, according to V K Vijayakumar from Geojit Investments. He noted that the heavy oversubscription and attractive listing gains have drawn millions of investors into the IPO market. “This has sucked off big money from the secondary market,” he added.

As many as eight mainboard IPOs are open for public bidding today. These include the maiden public issues of Rentomojo, Manika Plastech, Veegaland Developers, Manipal Payment and Identity Solutions, Karamtara Engineering, Asset Reconstruction Company (India), Steamhouse India and LCC Projects.

Also read | India’s IPO fundraising set to cross Rs 1 lakh crore in 2026

6) FII selling

Foreign investors remained net sellers of Indian equities on Friday, net selling shares worth Rs 438 crore, according to provisional data on NSE. While this is not massive selling, persistent FII selling by foreign investors dampens sentiment.

FII have remained net sellers on Dalal Street for five out of eight sessions in September so far.

What lies ahead for Dalal Street?

Headwinds for the market are getting stronger with the escalation in the Middle East conflict. Brent crude has shot up to around $108, said V K Vijayakumar.

He added that in case this high price sustains, or worse, spikes further, the impact on India’s GDP growth and consequently on corporate earnings will not be insignificant. An equally strong headwind is the rise in US bond yields, he added.

Technical view on Nifty

Technically, the Nifty’s undertone remains cautious as long as it trades below 23,600, said Rajesh Palviya, Head of Research at Axis Direct. He added that the index’s immediate support is placed at 23,300, and a decisive break below this level could drag the index towards 23,200.

“On the upside, 23,600 remains the key hurdle. Any moderation in crude prices or stabilisation in global equities could, however, provide room for a relief rebound,” he added.

This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.