Dalal Street is seeing a sharp shift in mood, and this time the pain is deeper in the broader market. While benchmark indices are already under pressure, the sharp sell-off is also visible in small and mid-cap stocks.
In intraday trading session today, the Nifty Midcap 100 slipped nearly 2%, falling over 1,100 points to around 54,221.
In a similar note, the BSE Small Cap index also saw a sharp sell-off in the intraday trading, plunging more than 2% to trade near 46,825.
Moreover, the sharp fall has wiped out a major investor wealth, with the total market capitalisation of BSE-listed companies declining by nearly Rs 8 lakh crore in a single session.
Let’s take a look at the three key factors driving this sharp sell-off in the broader market?
Foreign investor selling weighs on sentiment
Among the multiple factors amid the ongoing geo-political conflict, one of the key factor behind the fall is continuous selling by foreign investors.
So far in March, Foreign Portfolio Investors (FPIs) have pulled out more than Rs 1.23 lakh crore from Indian markets.
This outflow has been driven by the surging crude oil prices and weakness in the rupee. Both of this triggers are linked to the ongoing global tension.
Global uncertainty keeps investors on edge
Another major factor weighing on sentiment is the uncertainty around the West Asia conflict.
On one hand, there are reports indicating a delay in further escalation. At the same time, there are concerns that the conflict could intensify. This ongoing uncertainty is leading to frequent swings in global markets, which is directly impacting domestic equities.
Furthermore, weal global cues have added another pressure. Major Asian markets like Japan’s Nikkei and South Korea’s Kospi have declined.
Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, said, “Amid the ongoing US-Iran conflict, persistent uncertainty around de-escalation continues to weigh on global equity markets, including India. The lack of clarity on geopolitical outcomes has kept risk appetite subdued, leading to sustained volatility across asset classes.”
Rising crude prices and weak rupee
The third factor to watch out is the sharp rise in crude oil prices. Amid the geopolitical tension, Brent crude has moved close to $108 per barrel.
Higher oil prices are a concern for India. This because it depends heavily on imports.
In the early trade today, the Indian rupee has already weakened to record low levels, slipping past 94 against the US dollar.
He further added, “Markets are also increasingly factoring in a deterioration in macros, particularly with crude oil prices witnessing a sharp spike and the rupee weakening to record lows against the US dollar. This combination is elevating concerns around imported inflation and putting pressure on corporate margins, especially for oil-sensitive sectors. Going ahead, any meaningful rebound in equities would likely hinge on credible signs of geopolitical de-escalation along with stabilization in crude prices, ideally in the range of $85–90 per barrel. Until then, markets are expected to remain volatile with a negative bias.”