Why market is falling today: Sensex drops 1,700 pts, Nifty tests 24,000

An 8 per cent surge in crude oil prices over two days, doubts over the US-Iran peace talks following the exchange of military strikes by both countries, weakness in the rupee and fears that recent foreign inflows may reverse dragged domestic equity benchmarks Sensex and Nifty lower on Wednesday. Asian markets settled up to 5.39 per cent lower, led by Korean stocks. European shares, too, fell up to 2 per cent. Indian markets were no exception.

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Market selloff: Indices fall 2% 

The BSE SENSEX was trading at 76,467.78, down 1,712.94 points or 2.19 per cent. Nifty was trading at 23,896.85, down 501.85 points or 2.19 per cent. India VIX, which suggests a likely volatility in the market over the next 30 days, soared 22.96 per cent to 14.32, thanks to rise in crude's risk premium and uncertainty over the peace talks.   

Investor wealth declined by Rs 8.56 lakh crore to Rs 471.64 lakh crore compared with a valuation of Rs 480.20 lakh crore recorded on Tuesday

"In the near term, higher crude prices present a negative macroeconomic implication for India, as a sustained rise in oil prices could widen the oil import bill, put pressure on the current account deficit, add to inflationary pressures and keep the rupee under pressure," said Maulik Patel, Head of Research at Equirus Securities.  

IndiGo, Maruti Suzuki lead losers

Thirty of 30 Sensex stocks fell. InterGlobe Aviation Ltd led the fall with a 5.26 per cent fall. Maruti Suzuki, Bajaj Finance, Hindustan Unilever Ltd, UltraTech Cement and Larsen & Toubro tanked about 4 per cent each.
 

Crude price spike: 8% in two days!  

Crude prices jumped as fresh attacks on shipping in and around the Strait of Hormuz reintroduced a geopolitical risk premium into the energy market. The incidents challenged the stability of the recent US-Iran peace accord, with Iranian leadership indicating that geopolitical pressures could stall further negotiations. 

On Wednesday, Brent crude for September delivery rose 4.69 per cent to $77.64 a barrel. This took the two-day rise in oil prices to 7.84 per cent.

Renewed US-Iran tensions

"With the renewed US-Iran tensions and the consequent spike in Brent crude, the market is again back to uncertain territory. How long this would last and what would be its consequences are now in the realm of uncertainty. The market was slowly gaining strength on positive FII activity and improving macro fundamentals. The renewed US- Iran tensions have put a temporary question mark on this positive development. Therefore, investors have to wait and watch the developments," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments. 

Trump says it is over

Later, the US President Donald Trump said that his tentative ceasefire with Iran is done, raising the prospect of a renewed military conflict between the two countries, Bloomberg reported.

Broader indices such as Nifty500 and BSE500 fell 1.6 per cent each. A total of 61 per cent of stocks within Nifty 500 universe are still trading above their 50 days SMA compared with last week’s reading of 58 per cent. 

Rupee takes hit against dollar

Rupee fell 20 paise against the dollar and there were fears that foreign flows trend may reverse. 

"We believe the RBI's recent measures to encourage foreign currency inflows—including incentives for FCNR(B) deposits and easing of certain external borrowing norms—could potentially attract US$50–60 billion of additional inflows and stabilise the rupee," UBS said.