Monday morning was like a nightmare for the Indian stock market. As soon as the market opened, investors lost about Rs 14 lakh crore. Only red marks were visible all around in the market. The total value of all the companies listed on the Bombay Stock Exchange (BSE) has fallen sharply to Rs 437 lakh crore. Sensex took a deep dive of almost 2,400 points and fell to 76,424, while Nifty 50 also fell by 700 points to reach the level of 23,750.
The nature of the decline was such that shares of a big company like Indigo fell by 8 percent. A huge fall of 5 percent was recorded in the shares of Tata Steel, L&T, SBI and Maruti Suzuki. Shares of public sector banks (PSU Bank) disappointed investors the most and the index fell by more than 5 percent. After all, what happened suddenly that the market collapsed like a house of cards? Let us understand in detail those 7 reasons, due to which This huge disaster in the stock market She has come.
1. Huge fire in crude oil prices
The biggest reason for the spread of panic in the market is the cost of crude oil at the international level. Due to the ongoing war between America and Iran, there is a fear of stopping the supply of crude oil. Due to this, the prices of both West Texas Intermediate (WTI) and Brent crude have jumped by almost 30 percent and crossed $ 118 per barrel. This is the first time after the Russia-Ukraine war in 2022 that oil has crossed the $100 level. Traffic in the Strait of Hormuz, through which 20 percent of the world’s oil passes, is almost at a standstill due to fear of attacks on merchant ships.
2. Fierce war breaks out in the Middle East
The root cause of crude oil fire is the war in the Middle East. The war between America, Israel and Iran has now reached its 10th day. Over the weekend, America and Israel launched major military attacks on several Iranian oil depots. There are reports of the death of Iran’s supreme leader Ayatollah Ali Khamenei in these attacks, after which his son Mojtaba Khamenei has taken command. Iran has also retaliated by firing drones at Gulf countries. US President Donald Trump has clearly said that the war will stop only when Iran’s power ends. This environment has scared investors all over the world.
3. Rupee weakened against dollar
The increase in cost of crude oil has had a direct impact on our currency. The Indian rupee weakened by 0.5 percent and opened at a record low of 92.19 against the US dollar. When crude oil is expensive, India has to spend more dollars to buy it. According to commodity experts, as long as there is tension in Western Asia and crude oil prices remain high, the rupee will remain under pressure.
4. Increase in US bond yields
In America, the interest on government bonds (Treasury yields) has increased for the fourth consecutive day and the yield of 10-year bonds has reached 4.208%. In the language of stock market, understand it like this that when government bonds start giving good and safe returns, then investors invest their money there instead of taking the risk of the stock market. This is the reason why money is being withdrawn from shares.
5. Foreign investors (FIIs) packed their bags
Foreign institutional investors (FIIs) are continuously pulling out their money from the Indian market. According to market data, foreign investors sold shares worth about Rs 16,000 crore in the first week of March itself. At the same time, Rs 21,829 crore were withdrawn from the market in the first four trading days of the month. VK Vijayakumar, chief investment strategist of Geojit Investments, says that unless the situation in the Middle East improves and crude oil becomes cheaper, there is little hope of foreign investors returning.
6. There is panic in the markets around the world
This outcry has not arisen only in India. Markets across Asia have crashed due to the shock of crude oil. Japan’s Nikkei index crashed by 6 percent and South Korea’s Kospi crashed by almost 8 percent. The markets of Hong Kong and China have also fallen. Earlier on Friday, the markets of America and Europe also closed with huge losses. When there is an atmosphere of fear in the markets all over the world, the Indian markets also cannot remain untouched by it.
7. Fear of increasing inflation
According to rating agency Moody’s, if this war continues for a long time, India’s problems will increase. Expensive crude oil will directly increase inflation in the country. Petrol and diesel will become expensive, due to which the cost of transportation of goods will increase and everyday goods will become expensive. Due to increasing inflation, it will become difficult for the Reserve Bank (RBI) to reduce interest rates, which means it may take more time for the loan EMIs of the common man to become affordable.
What should investors do now?
‘India Vix’, an index measuring fear in the market, has jumped 20 percent to 23.90. Market experts advise that investors should not panic, because historically the impact of wars or geopolitical crises does not last long on the market.
According to experts, sectors like banking, automobile, cement, defense and pharma can remain strong even in this crisis. Technically, it is necessary for Nifty to remain above 22,500. If this level breaks, the market may slip from 22,000 to 21,500.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.