Domestic stock markets continued their sharp decline on Thursday, as benchmark indices dropped over 2% in early trading due to a surge in crude oil prices, escalating tensions in West Asia, and ongoing foreign investor outflows dampening investor sentiment.
The BSE Sensex tumbled by 1,557 points, or 2.13%, to 71,576.35 around 10:10 am, while the Nifty 50 fell by 495 points, or 2.19%, to 22,183.60, slipping below the 22,200 level.
Market breadth was negative, indicating a widespread risk-off sentiment across various sectors, leading to a loss of about Rs 10 lakh crore in investor wealth within a few hours of trading.
The downturn was triggered by a significant increase in global crude oil prices following comments from former US President Donald Trump hinting at a potential escalation in the Iran conflict, raising concerns about supply disruptions in a region crucial to global energy markets.
Brent crude surged approximately 5% to $105 per barrel, while the US 10-year bond yield rose to 4.36%, tightening global liquidity conditions. This spike in crude prices has immediate and substantial implications for India, widening the trade deficit, increasing input costs across industries, and putting pressure on the rupee, negatively impacting the equity market.
Selling pressure was evident across heavyweight stocks, particularly in the financial and cyclical sectors. State Bank of India dropped by 3.7% to Rs 979.95, while HDFC Bank, ICICI Bank, and Axis Bank saw declines ranging from 1.4% to 2.2%. Financial stocks are particularly sensitive to foreign fund flows and currency fluctuations, both of which have turned unfavorable.
Among cyclical stocks, Larsen & Toubro declined by 3.7% to Rs 3,473.40, and Reliance Industries fell by 2.7% to Rs 1,332.50, reflecting pressure on energy-related and capital-intensive plays. Aviation stocks were heavily impacted, with InterGlobe Aviation plummeting by 4.17% to Rs 4,006.40 due to rising aviation turbine fuel costs threatening margins.
Pharma stocks also experienced significant declines, with Sun Pharmaceutical Industries falling over 4% to Rs 1,657.60, indicating broad-based risk aversion rather than sector-specific weakness.
IT stocks provided limited support, with HCL Technologies remaining largely unchanged at a minor decrease of 0.07%, while Infosys and TCS registered modest declines, supported by their export focus and sensitivity to a weaker rupee.
Continued foreign portfolio investor outflows added to the downward pressure on market sentiment. FPIs withdrew Rs 8,331 crore on April 1, intensifying the strain on both equities and the rupee. The combination of high crude prices, persistent capital outflows, and a weakening currency is raising concerns about a widening current account deficit and tighter financial conditions.
Technically, the market structure is fragile, with the Nifty failing to hold above 22,770, indicating underlying weakness and potential testing of lower levels around 21,900. The broader market also reflected stress, as mid- and small-cap stocks declined alongside large caps, signaling a shift in investor sentiment.
Given the elevated crude prices and ongoing geopolitical tensions, market volatility is expected to persist in the short term. Investors will closely monitor developments in West Asia, oil price movements, and foreign fund flows for guidance on market direction.