Why is Indian stock market down? 3 key factors explained - Top losers contributing to the fall in Sensex, Nifty today

The Indian stock market continued witnessing selling pressure for the third consecutive session on Wednesday, 9 September, tracking weak global cues. The Sensex dropped 813 points, or 1.08%, to end at 74,764.23, while the NSE barometer Nifty 50 also dropped 204 points, or 0.86%, to close at 23,431.50. In these three sessions, the Sensex has crashed 2.3%, while the Nifty 50 has shed 2%.

Why is the stock market down today?

Here are three key factors behind the fall in the domestic stock market:

1. Crude oil prices near $100

Crude oil prices have been on an uptrend, weighing on market sentiment. Brent crude trades near $100 per barrel, fuelling concerns over a potential inflation flare-up, monetary tightening, and distortion in India's growth-inflation dynamics.

India is the world's third-largest oil-importing country. So, higher oil prices can inflate the country's dollar-denominated import bill and can put pressure on the trade balance and the rupee. The rupee opened 5 paise lower at 94.87 against the US dollar on Wednesday.

2. US-Iran tensions escalate

Escalating US-Iran tensions are keeping investors on tenterhooks. According to Reuters, US forces struck multiple Iranian oil tankers linked to Iran’s Revolutionary Guard Corps (IRGC) in response to further attempted missile attacks on a US Navy warship.

According to Al Jazeera, the US military said it has destroyed five Iranian crude oil carriers following the IRGC's ballistic missile attacks on a US Navy warship.

The US-Iran conflict has now stretched for over 6 months, and there is no resolution in sight in the near term. A prolonged period of conflict can keep oil prices higher for longer, impacting the country's overall economic growth and the profitability of India Inc.

3. The IPO factor

Experts believe the deluge of IPOs is sucking up liquidity that would otherwise go to the secondary market. On the BSE, as many as 146 IPOs have been launched this year.

“Two strong headwinds are impacting the market now. One, Brent crude around $100 amidst escalating US-Iran tensions is weighing on the economy. Two, the booming IPO market is sucking liquidity out of the market, resulting in a sustained downtrend in the Nifty," V K Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.

"Perhaps, the latter is impacting the market more than the former. The listing gains from IPOs, which have increased to about 22% since June, are driving investors- both retail and institutional- into the IPO market. This is understandable since Nifty return YTD is negative 9.5%," Vijayakumar said.

Top contributors to the falling market

HDFC Bank, Infosys, Reliance, ICICI Bank, and Bharti Airtel were the top drags on the Sensex index.

On the Nifty, HDFC Bank, Infosys, Reliance, Bharti Airtel, and ICICI Bank were the top drags in that order.

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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.