Dalal Street is witnessing a tough tug of war between bulls and bears, as markets continue to swing sharply amid rising geopolitical tensions. After closing strongly on March 25 and remaining shut on March 26 for Ram Navami, the mood has once again turned negative on March 27.
It now appears that bears have taken control. Both benchmark indices are trading sharply lower, with the Sensex falling over 1,600 points below 73,800 and the Nifty slipping below the 22,900 mark, down more than 2% at this hour.
At the same time, the India VIX, often referred to as the fear gauge, surged over 9%, indicating rising nervousness among investors.
So, what is driving this sharp fall? Here are the key reasons behind today’s market decline.
Rupee hits fresh low, adds to pressure
One of the biggest concerns for the market today is the weakness in the Indian currency. In early trade today, the Indian rupee slipped to a fresh low of 94.29 against the US dollar, compared to its previous close of 93.96.
The fall is largely linked to worries around rising energy prices and supply disruptions due to the ongoing West Asia conflict.
Since India depends heavily on oil imports, a weaker rupee makes imports more expensive, adding pressure on inflation and the overall economy.
War-related uncertainty driving volatility
Markets are reacting sharply to every new development related to the ongoing geopolitical tension. The uncertainty around how long the conflict will last is making investors nervous, leading to frequent swings between gains and losses.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said, “The on and off reaction of the market to news and events regarding the war is likely to continue in the near-term,”
“The market correction since the war began has brought down Nifty valuations to fair levels.”
Further he noted, “The Indian economy is strong enough to absorb the shock if the war ends, crude cools down and gas availability becomes normal. But if the war prolongs, crude remains elevated for months together, and gas availability constraints continue, the stress on India’s macros will be significant and the market will discount that. In brief, everything boils down to how long the war will last. The market hope is that since a prolonged war is in nobody’s interests, it may end soon. The US itself is now looking for an exit strategy. Market corrections and rising retail price of petroleum products may exert pressure on the US regime to cool down the conflict.”
Broad-based selling across sectors
Almost all sectors are trading in the red. Selling pressure is visible across financials, fast-moving consumer goods (FMCG), real estate, media, oil and gas, and consumer durables.
The Nifty Auto index is trading down over 2%. Apart from this financials, FMCG, media, realty, consumer durables, oil and gas is also down between 1-2% at this hour.
The only pocket showing some resilience is the information technology sector.
Heavyweights drag the indices lower
Large-cap stocks are playing a major role in pulling the market down.
In today’s trading session, the share price of companies such as Eternal (Zomato parent), Bajaj Finserv, Bajaj Finance, IndiGo, Larsen & Toubro, HDFC Bank, and State Bank of India is trading between 2-3%.
On the other hand, a few information technology stocks such as Tata Consultancy Services, HCLTech, Infosys, and Tech Mahindra managed to post modest gains.
Oil marketing stocks fail to hold gains
Oil marketing companies initially saw some buying interest after the government reduced excise duty on fuel. The duty on petrol was cut to Rs 3 per litre from Rs 13 earlier, while diesel duty was reduced to zero from Rs 10.
However, the initial optimism did not last. Shares of companies like Hindustan Petroleum Corporation, Bharat Petroleum Corporation, and Indian Oil Corporation gave up early gains and slipped into losses.
With rising crude prices, a weakening currency, and ongoing geopolitical tensions, uncertainty remains high.