The Indian rupee fell sharply, hitting a record low of 95.63 against the US dollar. This dramatic fall led to significant instability in the Indian stock market. It occurred after U.S. President Donald Trump stated that the ceasefire with Iran was “on life support.” With this uncertainty, crude oil prices surged, further impacting the economy.
Sensex Experiences Massive Decline
On the same day, the Sensex plummeted by 800 points, reaching 75,200. This steep drop followed the rupee’s decline and heightened geopolitical tensions. The Nifty also experienced a sharp fall, dropping below 23,600. The stock market faced tremendous selling pressure, leading to a loss of about ₹5 lakh crore for investors.
IT Stocks Hit Hard
The IT sector was particularly affected. Stocks of Infosys, Tech Mahindra, TCS, and HCL Tech saw the biggest losses in the Sensex. Despite the rupee’s weakness, these stocks dropped by 2-3%. Other major companies like Adani Ports, Maruti Suzuki, HDFC Bank, and ICICI Bank also recorded losses between 1-2%.
Broader Market Downturn
The downturn was widespread. The Nifty Smallcap 100 and Nifty Midcap 100 indices also slipped into the red. On the sectoral front, Nifty IT faced the biggest losses, dropping by more than 2%. In contrast, Nifty Metal saw a slight gain of over 0.5%. Overall, 1,847 stocks on the NSE saw declines, while 737 stocks gained, and 96 stocks remained unchanged.
Key Factors Behind The Fall
Several factors contributed to the market decline:
- Trump Rejects Iran’s Nuclear Proposal: U.S. President Trump dismissed Iran’s new nuclear proposal as “a piece of trash” and unacceptable. This rejection cast doubt on the ceasefire agreement and heightened tensions between the U.S. and Iran.
- Crude Oil Prices Surge: Oil prices remained high as expectations of a quick resolution to the Middle East conflict faded. The Strait of Hormuz, a crucial global shipping route for oil, is now a focal point of tension. As a result, Brent crude oil prices rose by nearly 1%, reaching $105 per barrel.
- Rupee’s Decline Linked to Geopolitics: The rupee’s fall continued due to the uncertainty surrounding the U.S.-Iran conflict and its impact on oil prices. This, in turn, led to rising inflation and further strained India’s economy.
- Bond Yields Increase: U.S. Treasury yields also saw a rise, with the 10-year note yield increasing to 4.423% and the 30-year bond yield rising to 4.994%. This made bonds more attractive to investors, diverting funds from stocks.
FII Selling Pressure on Indian Market
Foreign Institutional Investors (FII) continued their selling spree in Indian equities. On Monday, they sold ₹8,438 crore worth of shares. This marked the fifth consecutive session of FII selling, contributing to the negative market sentiment.
