The Indian stock market recorded sharp losses on Wednesday, with Sensex and Nifty falling around 1% to extend their losing streak as escalating Iran-US war, Trump’s renewed tariff threats and other factors spooked investors.
Sensex tumbled over 715 points to close at 76,755, while Nifty 50 declined over 191 points to 23,996. The selloff wiped off nearly Rs 4.25 lakh crore from the total market capitalisation of all companies listed on BSE, dragging it down to Rs 480 lakh crore.
IndiGo shares plunged nearly 4% to lead losses on the Sensex, while Axis Bank, Infosys, SBI, UltraTech Cement, ICICI Bank and Reliance Industries (RIL) shares dropped nearly 2% each to follow. Adani Ports, Tech Mahindra, Kotak Mahindra Bank and HDFC Bank shares meanwhile fell over 1% each. Bucking the trend, Eternal, Hindustan Unilever and Power Grid shares rose nearly 1%.
After showing some resilience against the selloff in the earlier sessions, broader markets also slipped into the deep red on Wednesday. Nifty Smallcap 100 and Nifty Midcap 100 indices dropped up to 1.5%. As a result, the overall market breadth turned negative, with NSE seeing 2,232 declines and 1,068 advances, while 109 stocks remained unchanged.
India VIX, which measures volatility in the market, sharply jumped over 5% to 13.29 amid the rise in uncertainties on Dalal Street. Sectorally, Nifty Realty crashed around 3% to lead losses, while Nifty PSI Bank dropped around 2%. Nifty FMCG meanwhile gained 0.65%.
Here are the key factors pushing the market down today:
1) Iran-US conflict escalates further
Three oil tankers carrying Saudi crude to Asia reversed their course in the Red Sea on Tuesday allegedly after threats from Yemen's Iran-aligned Houthis, as the widening Middle East conflict disrupted shipping through two of the world's most critical energy chokepoints.
With Iran already threatening shipping through the Strait of Hormuz, the Red Sea has served as the main alternate route out for millions of barrels of Saudi oil per day. While US Secretary of State Marco Rubio said on Wednesday the United States is still willing to negotiate an end to the Iran crisis, he noted that Iran is not serious about talks.
2) Oil prices jump above $92/barrel
Oil prices hit a two-month high on Wednesday as concerns over further supply disruptions grew after the renewed tensions in the Middle East. Brent crude futures traded above $92 per barrel, while WTI Crude futures rose above $85 per barrel.
Goldman Sachs, in its recent note, warned that Brent crude could surge to $120 per barrel if disruptions through the Strait of Hormuz persist, even as its base case assumes an eventual easing of tensions in the Middle East.
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3) Trump’s tariff tantrums return
US President Donald Trump on Tuesday announced a phased tariff plan for imported generic medicine, spooking investors after his earlier tariff flipflops led to major market shock since he took office last year.
Under the plan, generic medicines entering the US will continue to attract zero tariffs for two years from August 1. Thereafter, imports will face a 100% tariff for one year, followed by a 200% levy.
As a result, pharma stocks plunged. Lupin, Piramal Pharma, Glenmark, Cipla, other pharma stocks crashed up to 4%, pushing the Nifty Pharma index down nearly 2%.
4) Fed rate hike expectations
The US Federal Reserve will likely keep its key interest rate steady for the rest of 2026, according to a Reuters poll, although a majority of those who answered a separate question about the chance of a hike this year now described the likelihood as "high", marking a reversal from last month when most saw it as "low".
Prediction market platform Polymarket also saw a rise in bets for a Fed rate hike later this year. CME Group's FedWatch now sees a 27% probability of a rake hike.
5) Rupee falls
The Indian rupee came under pressure on Wednesday, opening 11 paise lower at 96.36 against the US dollar as the latter strengthened amid ising crude oil prices and increased demand for safe-haven assets.
“Elevated energy prices have increased concerns over India's import bill and inflation outlook, while cautious global sentiment has further weighed on the rupee. Market participants are now focused on the US Federal Reserve's policy decision on 29 July, which is expected to provide the next major direction for the US dollar and emerging market currencies. Technically, the rupee is expected to trade in the 96.00–96.45 range in the near term,” said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities.
6) Bond yields rise
US Treasury yields jumped, further dampening equity market sentiment. The yield on benchmark US 10-year notes rose to 4.63% while the 30-year bond yield rose to 5.137%. Rising bond yields typically make bonds more attractive to investors, which in turn can lead to some downtrend in markets.
7) Persistent FII selling
Foreign investors remained net buyers of Indian equities on Tuesday, purchasing shares worth Rs 1,650 crore, according to provisional data on NSE. However, the overall trend has been negative, with FIIs remaining net sellers of Indian equities for the past four consecutive sessions.
FIIs have in fact remained net sellers on Dalal Street in five out the past six sessions, net selling Indian equities worth more than Rs 6,000 crore after a long buying streak. Persistent FII selling dampens sentiment and weighs on the stock market.
What lies ahead?
The continuing US-Iran conflict and rising Brent crude price will continue to weigh on markets despite positive news on other fronts, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
The price correction in some of the leading banking names appears to be over, the analyst said, adding that there is value in this segment. “Rupee is likely to remain stable, buoyed by positive news on the dollar flows from FCNR deposits which has crossed $20 billion now. The inflows are likely to gather momentum, going forward,” he added.
“Weakening of the chip trade and sharp correction in markets like South Korea during the last one month are making India relatively stable and attractive from the valuation perspective. FPIs are not selling big in India now and are turning buyers on some days. Dips in the market will provide buying opportunities in fundamentally sound stocks. The outperformance of the broader market may continue in the near-term,” according to Vijayakumar.
Technical view on Nifty
Rising crude prices have again become a pain point for Indian equities, said Rupak De, Senior Technical Analyst at LKP Securities. As crude sustains above the 50EMA, Nifty is set to break below the 50EMA, he said, adding that it looks like the Nifty and crude oil are again moving inversely to each other.
“The days of consolidation seem to have been broken on the downside on the daily chart of the Nifty. The RSI is in a bearish crossover, pointing towards weak momentum in the near to short term. On the lower end, the fall might extend towards 23,700 - 23,600 if the Nifty falls below 23,900. On the higher end, near-term resistance is seen at 24,100,” according to the analyst.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
