Tension is increasing in the Middle East. The days of war are increasing. Anyway, the alarm bells have started ringing louder for the economy. Last week’s record selling by foreign investors on Monday and the rise in crude oil prices have completely shaken the Indian stock market. Monday proved to be Black Monday for the market. As soon as it opened, the major market indices Sensex and Nifty crashed. Within an hour, about Rs 13 lakh crore of investors were lost.
On Monday, the benchmark equity index started with a decline. It reflects broader risk aversion across Asia, as rising tensions between the US and Iran kept oil prices high and deepened concerns about growth and earnings prospects.
Till the time of writing the news, Sensex was down by 1,612.87 points or 2.16 percent at 72,920.09 and Nifty was at 22,600.85, down by 513.65 points or 2.22 percent. During this period, about 592 shares of the market registered a rise, 2,990 shares declined and there was no change in 153 shares.
Investors lost money
When the market closed last Friday, it was in the green. A rise was seen in the major market indices Sensex and Nifty. When the stock market was closed on that day, the total market cap of BSE was around Rs 4,29 lakh crore, which has come down to Rs 4,16 lakh crore today.
Why did the market fall so much?
- Iran-Israel War- Tension is increasing in West Asia, while it was expected that it would subside soon. US President Donald Trump threatened on Saturday that if Iran did not open the Strait of Hormuz within 48 hours, he would “completely destroy” its energy infrastructure. Today is the last day of that threat. Meanwhile, Tehran has warned that the Strait of Hormuz will be “completely closed” if the US follows through on its threat to target its power plants. These factors have put pressure on the market.
- Decline in rupee- According to Bloomberg data, the Indian rupee fell by 18 paise to reach a record low of 93.8925 in early trade on Monday. The reason for this was the concern that energy prices might increase further amid increasing tensions in the Middle East. The domestic currency has fallen by about 3% amid rising oil prices since the start of the US-Iran war. The weakness of rupee is very negative for the stock market.
- Crude oil prices- Brent crude rose 0.62 percent to US$112.9 a barrel and remained above the US$110 mark amid concerns of supply disruptions related to the ongoing conflict. Brent crude being around $113 per barrel is a special challenge for India, which is one of the world’s largest oil importers. Continuously high oil prices promote inflation. Weakens the rupee.
- Selling by foreign investors- Amid rising crude oil prices and falling Indian rupee, foreign portfolio investors (FPIs) have sold Indian stocks worth more than Rs 1 lakh crore since the start of the US-Iran-Israel war. According to NSDL data, FPIs have withdrawn Rs 1,03,967 crore from the Indian financial market till 20th March. This is also an important reason behind such a terrible fall in the eye market on Monday.