Indian equities crashed on Monday tracking losses across other Asian markets as Brent crude prices surged to over $108 per barrel after US President Donald Trump rejected Iran’s latest proposal to reopen the Strait of Hormuz.
The Sensex slumped 1,124.02 points, or 1.52%, to close at a six-month low of 72,771.72, falling below the 73,000-mark. The Nifty-50 plunged 360.25 points or 1.56% to end the session at 22,780.25.
The broader Nifty Midcap 100 and Nifty Smallcap 100 fell by 1.63% and 1.85%, respectively. Investors lost Rs 7.52 lakh crore in notional wealth as the total market capitalisation of BSE-listed companies fell to Rs 474.36 lakh crore. In dollar terms, the market capitalisation fell below the $5-trillion mark to $4.94 trillion.
The India VIX surged 12.54% to 13.69, indicating heightened market volatility.
Indian markets were the third-worst performers in Asia, after South Korea, which declined 2.70%, and China, which fell 1.67%. On Monday, the market breadth was negative, with 3,108 losers against 1,356 gainers on the BSE.
So far in September, the Sensex and Nifty have declined 5.44% and 5.40%, respectively, and are on course to record their worst monthly performance in six months.
“Volatility due to higher crude prices and rising expectations of a rate hike are the key reasons for the volatility in the market,” said Pankaj Pandey, head of research, ICICI Securities.
He added the banking sector is also feeling the impact of IRDAI’s capping of commissions and leadership issues at HDFC Bank and Kotak Bank.
Near term, markets are likely to remain volatile and headline-driven until oil prices, geopolitical tensions and US yields stabilise. However, resilient domestic growth, steady SIP/DII flows and improving corporate earnings visibility should provide downside support. The appropriate approach is to remain selective, favour quality businesses with durable earnings, reasonable valuations and balance-sheet strength, and use volatility to build positions gradually rather than chase short-term rebounds, said Devender Singhal, equity fund manager, Kotak Mutual Fund.
Ankur Punj, MD, Equirus Wealth, observed the geopolitical situation has become worrying with the US-Iran conflict escalating. “With US bond yields already climbing above 5% and markets seeing little respite from overseas fund outflows, the undertone is likely to remain cautious with a negative bias in the near to medium term.”
Foreign portfolio investors sold shares worth Rs 5,353.22 crore ($557.71 million), while domestic institutional investors purchased shares worth Rs 5,189.02 crore, according to provisional data released by the exchanges.
All sectoral indices on the BSE and NSE ended in the red. With a 3.24% decline, PSU banks were the top sectoral losers, followed by realty, oil & gas and metals. The BSE Bankex declined 2.05%, while the Bank Nifty fell 1.99%.