Monday morning was a nightmare for the Indian stock market. As soon as the market opened, investors suffered a loss of about ₹14 lakh crore. The market was filled with red marks. The total value of all companies listed on the Bombay Stock Exchange (BSE) fell sharply to ₹437 lakh crore. The Sensex fell nearly 2,400 points to 76,424, while the Nifty 50 also fell 700 points to 23,750.
The fall was so severe that shares of big companies like IndiGo fell by 8 percent. A huge fall of 5 percent was recorded in the shares of Tata Steel, L&T, SBI and Maruti Suzuki. Shares of public sector banks (PSU banks) disappointed investors the most, whose index fell by more than 5 percent. Why did the market collapse like a house of cards? Let us know the seven reasons due to which there was such a huge fall in the stock market.
1. Crude oil prices on fire
The biggest reason for panic in the market is the rising prices of crude oil at the international level. The ongoing war between the US and Iran has increased the fear of supply disruption. As a result, the prices of both West Texas Intermediate (WTI) and Brent crude have increased by nearly 30 percent to more than $118 per barrel. This is the first time that oil has crossed the $100 level since the Russia-Ukraine war in 2022. Traffic in the Strait of Hormuz, through which 20 percent of the world’s oil passes, has come to a near halt due to fears of attacks on merchant ships.
2. A fierce battle in the Middle East
The rise in crude oil prices is due to the ongoing war in the Middle East. The fight between the US, Israel and Iran has now entered its 10th day. Over the weekend, the US and Israel launched major military attacks on several Iranian oil depots. The attacks followed the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, who was succeeded by his son, Mojtaba Khamenei. Iran has retaliated by launching drones against Gulf countries. US President Donald Trump has clearly said that the war will end only when Iran’s power ends. This environment has scared investors around the world.
3. Rupee weak against dollar
The rising prices of crude oil have had a direct impact on our currency. The Indian rupee weakened 0.5 percent against the US dollar and opened at a record low of 92.19. When crude oil is expensive, India has to spend more dollars to buy it. According to commodity experts, as long as tensions remain in West Asia and crude oil prices remain high, the rupee will remain under pressure.
4. Increase in US bond yields
Interest rates on US government bonds (Treasury yields) have increased for the fourth consecutive day, taking the 10-year bond yield to 4.208%. In stock market terms, when government bonds give good and safe returns, investors invest their money in the stock market instead of taking risks. For this reason money is being withdrawn from stocks.
5. Foreign investors (FIIs) are pulling out
Foreign Institutional Investors (FIIs) are continuously withdrawing their money from the Indian market. According to market data, foreign investors sold shares worth about ₹16,000 crore in the first week of March alone. At the same time, ₹21,829 crore was withdrawn from the market in the first four trading days of the month. VK Vijayakumar, Chief Investment Strategist of Geojit Investments, says that unless the situation in the Middle East improves and crude oil becomes cheaper, there is little hope of foreign investors returning.
6. Panic in markets around the world
This anxiety is not limited to India only. The crude oil shock has devastated markets across Asia. Japan’s Nikkei index fell 6 percent and South Korea’s Kospi fell nearly 8 percent. The markets of Hong Kong and China also fell. Earlier on Friday, the markets of America and Europe also closed with heavy losses. When there is an atmosphere of fear in the global markets, the Indian markets also cannot remain untouched by it.
7. Fear of increasing inflation
According to rating agency Moody’s, if this war continues for a long time, India’s problems will increase. Expensive crude oil will directly increase inflation in the country. Petrol and diesel will become more expensive, due to which the cost of transportation will increase and everyday things will become more expensive. Due to rising inflation, it will be difficult for the Reserve Bank of India (RBI) to reduce interest rates, which means it may take some more time for the common man’s loan EMI to become affordable.
