Sensex tumbles 1,123 points as war fears rattle markets; investors lose ₹10 lakh-crore

Indian equities witnessed a sharp sell-off on Wednesday as escalating tensions in West Asia triggered risk aversion among investors. Rising crude oil prices, a record fall in the rupee and continued foreign fund outflows weighed heavily on market sentiment.

The benchmark indices extended their recent decline, with broader markets falling even more sharply, signalling widespread selling across sectors.

Sharp fall in indices

The Sensex fell 1,123 points (1.40 percent) to close at 79,116.19, while the Nifty 50 declined 385 points (1.55 percent) to end at 24,480.50.

Broader market indices also suffered significant losses:

• BSE 150 MidCap Index dropped 2.26 percent

• BSE 250 SmallCap Index declined 2.24 percent

The sell-off wiped out around ₹10 lakh-crore in investor wealth in a single session. The total market capitalisation of BSE-listed companies fell to ₹447 lakh-crore from ₹457 lakh-crore in the previous session.

The recent correction has been sharp. Over the past four sessions:

• Sensex has fallen 3,160 points (3.8 percent)

• Nifty has declined 1,016 points (4 percent)

Market volatility also surged. India VIX jumped more than 23 percent to above 21, reflecting heightened nervousness among investors.

Key reasons

Several global and domestic factors combined to trigger the sharp decline.

1. Escalating US-Iran war

The ongoing conflict in West Asia remains the biggest concern for global markets. US President Donald Trump has indicated that the conflict could last several weeks, adding to global uncertainty.

Market experts say the lack of clarity over the duration and scale of the conflict is prompting investors to reduce exposure to risk assets.

VK Vijayakumar of Geojit Investments noted that rising crude prices and geopolitical uncertainty are pushing markets into a volatile phase.

2. Rupee plunges to record low

The rupee weakened sharply, falling 68 paise to close at a record low of 92.15 against the US dollar.

The fall came as the US dollar strengthened globally amid concerns that higher oil prices could reignite inflation pressures.

A weaker rupee can have multiple negative effects:

• Higher import costs for companies

• Pressure on corporate margins

• Increased foreign investor outflows

Currency analysts expect continued volatility in the near term, with crude oil prices and geopolitical developments remaining key drivers.

3. Crude oil prices surge

Oil prices have jumped to multi-month highs amid concerns about supply disruptions in the Middle East.

• Brent crude has risen above $82 per barrel

• WTI crude is trading above $75 per barrel

For India, which imports more than 90 percent of its crude oil needs, rising oil prices pose a significant macroeconomic risk.

Economists estimate that every $1 increase in crude oil prices raises India’s annual import bill by around ₹16,000 crore.

Higher oil prices can trigger several negative effects:

• Widening current account deficit

• Higher inflation

• Rupee depreciation

• Pressure on economic growth

4. Foreign investors resume selling

Foreign institutional investors (FIIs) have resumed selling Indian equities amid rising geopolitical risks and currency weakness.

Key trends include:

• FIIs sold ₹6,641 crore worth of Indian stocks in February

• This marked the eighth consecutive month of net selling

• On March 2 alone, FIIs sold ₹3,295.64 crore in the cash segment

Persistent FII outflows have been a major factor behind the market’s recent weakness.

5. Rising risks to earnings outlook

Investors are also concerned that prolonged geopolitical tensions could derail the expected recovery in corporate earnings.

Higher energy costs and supply disruptions could:

• Increase production costs for companies

• Reduce consumer demand

• Weigh on profitability

Analysts warn that the mismatch between high market valuations and moderate earnings growth could widen further if the conflict drags on.

However, market experts say that if the war ends quickly—within three to four weeks—many of these fears could ease and markets may stabilise.

For now, though, uncertainty around oil prices, global inflation and geopolitical risks is likely to keep investors cautious.

(By arrangement with livemint.com)