The selling pressure is increasing across the market in afternoon trade. The Nifty is now trading around the crucial 25,200 mark. This level is close to the lows that the markets slipped to in early January this year. The Sensex too has fallen nearly 1,000 points.
The broader markets too are under significant pressure, with the Small and midcap indices falling over 0.7% each. Significant selling was seen across financial and pharma stocks. Counters like Bharti Airtel and IndiGo are also under pressure.
Speaking on the price action in afternoon trade, market veteran Deepak Jasani said, “The ongoing tension between Iran and the US, along with escalation along the Pakistan-Afghanistan border, is keeping market sentiment cautious. Additionally, investors are still worried about the valuations, especially the small and midcaps, and apprehensive about the near-term visibility for the IT sector. These lingering concerns are weighing on investor sentiment.”
3 reasons why the market is falling today
The key factors that are weighing on investor sentiment include
#1 Pakistan-Afghanistan clash
The escalating tension between Pakistan and Afghanistan is definitely acting as a key sentiment dampener for the markets as it creates a sense of uncertainty. Pakistani and Afghan forces clashed after the Taliban launched what it called retaliatory strikes on Pakistani installations. China has also expressed concern over the escalation along the Pakistan-Afghanistan border. China’s Foreign Ministry indicated that as the country has been mediating the conflict through its own channels, they are willing to play a constructive role in cooling the situation.
#2 Geopolitical tension in West Asia and oil prices
The other big concern for the markets at the moment is the risk of any diplomatic breakdown that escalates tensions in the Middle East. All eyes are on the Iran-US talks. The big concern is that the breakdown of talks may have a direct impact on the crude price. Brent Crude prices are now holding steady above $71/bbl, while the Nymex Crude is trading north of $65/bbl. Any big jump in oil prices can potentially stoke inflation and hurt Asia’s net energy importers.
#3 Fears of AI disruption across IT sector
The tech sector has seen slight stability in the last two sessions. However, globally the AI-led disruption fears continue to be a big worry for the markets. Despite Nvidia’s bullish projections, scepticism over the profitability of heavy AI outlays kept investors cautious and weighed on risk appetite across markets.
Along with these factors, uncertainty about the US trade policy following the US Supreme Court ruling that struck down the Trump administration’s emergency tariffs also remained in focus. In fact, a quick look at the overall emerging market space would indicate that the MSCI EM Index fell over half a percent after a 9-session winning streak.