NEW DELHI :
Investors lost over ₹3 trillion on Monday, as the benchmark BSE Sensex nosedived 787 points, tracking spike in global crude oil prices and rupee slipping below the 72-mark. This is Sensex’s biggest single-day fall since September 2019.
BSE Sensex tumbled 1.9% to close at 40,676.63, and with this, equity market capitalisation came down to ₹153 trillion from Friday’s close of ₹156 trillion.
Crude oil prices hit a near nine-month high due to increased tensions between the US and Iran, after the US killed Iran’s top commander General Qassem Soleimani early on Friday.
“Indian market is reacting more negatively than other emerging markets due to crude oil impact. Since our dependence on crude imports as a percentage of consumption is the highest, the impact on economy and markets is also higher," said Rusmik Oza, senior vice president and head of fundamental research at Kotak Securities.
Owing to the negative market breath, 28 of 30-share Sensex closed in the red. Overall, 603 shares advanced, while 1,944 shares declined on the BSE. Among sectoral indices, Metal Index was the biggest loser and slumped 3% followed by BSE Bankex, which slipped 2.4%.
The market witnessed a deep dive due to unexpected spike in India’s 10-year bond yield from 6.50 to 6.55% and sustained weakness in the rupee. The slump was also because of negative global flows, which is unlikely to escalate further. The advance to decline ratio was steeply down at 1:4, indicating the sell-off was broad based.
“Along with crude, the negative impact of currency is also weighing on Indian markets. The geopolitical tension has increased the risk of unknowns which is getting factored into the market. Just before the event took place, India’s Nifty-50 index was trading in a new zone on the back of budget expectations. However, forward PE of Nifty-50 at 19x was close to its previous peak which made it susceptible to any external shock," Oza added.
The friction between the two countries began Friday after the US killed a top Iranian commander, Major General Qassem Soleimani, in an air strike at Baghdad airport. The situation further intensified after President Donald Trump threatened sanctions against Baghdad on Sunday, following which Iraq's parliament called on US troops to leave the country. Trump also threatened "major retaliation" against Iran if Tehran were to retaliate for the killing.
“Escalating tensions may dent market risk appetite and weigh down on riskier assets like global equity markets and commodities like base metals. However, it may continue to lend support to safe haven like gold and silver and will also be supportive of crude oil prices amid worries over supply disruption from the region. The Middle East accounts for nearly half of the world's oil production, while Iraq is the second largest producer among the Organization of the Petroleum Exporting Countries (OPEC)," Ravindra Rao, vice president - head commodity research at Kotak Securities, said.