Dalal Street witnessed a sharp selloff on March 4 as escalating tensions in West Asia triggered heavy risk aversion, pushing benchmark indices and broader markets deep into the red.
The BSE Sensex tumbled 1,123 points, or 1.40 percent, to close at 79,116.19. The Nifty 50 fell 385 points, or 1.55 percent, to settle at 24,480.50.
The broader market saw steeper declines. The BSE 150 MidCap Index dropped 2.26 percent, while the BSE 250 SmallCap Index lost 2.24 percent, signalling widespread selling beyond frontline stocks.
Investors lost nearly ₹10 lakh-crore in a single session, with the total market capitalisation of BSE-listed companies shrinking to ₹447 lakh-crore from ₹457 lakh-crore in the previous session.
Volatility spiked sharply, with India VIX jumping over 20 percent to hover near the 21 mark, reflecting heightened nervousness.
Five key factors drove the selloff:
The ongoing conflict between the US and Iran, following the killing of Iran’s Supreme Leader Ali Khamenei, has intensified. Missile exchanges across West Asia have fuelled fears of a prolonged conflict.
US President Donald Trump said the war could end in four to five weeks but added that Washington was prepared for a longer engagement. The uncertainty has pushed investors to cut exposure to risk assets globally.
Market participants fear that a drawn-out war could disrupt energy supplies and derail global growth.
The Indian rupee slumped 66 paise to a record low of 92.15 against the dollar in early trade, pressured by a stronger dollar and rising crude prices.
A weaker currency raises input costs for companies, especially oil importers, and could accelerate foreign portfolio outflows. Currency volatility has added to investor caution.
Brent crude climbed above $82 a barrel, while WTI crude moved past $75, amid concerns over supply disruptions linked to the conflict.
For India, which imports over 90 percent of its crude requirements, higher oil prices pose multiple risks:
Wider current account deficit
Rising inflation
Pressure on the rupee
Strain on fiscal calculations
Economists estimate that every $1 increase in crude prices raises India’s annual import bill by around ₹16,000 crore.
Sustained high crude prices could delay rate cuts by the US Federal Reserve and the Reserve Bank of India, dampening liquidity hopes.
Foreign institutional investors have resumed selling amid geopolitical uncertainty and currency weakness.
In February, FIIs were net sellers to the tune of ₹6,641 crore in the cash segment, extending their selling streak. Fresh outflows in early March have intensified pressure on large-cap stocks.
Markets were already grappling with concerns over a growth-valuation mismatch. The spike in geopolitical risks has now cast a shadow on the anticipated earnings revival.
A prolonged conflict could:
Keep input costs elevated
Weaken consumer demand
Hurt corporate margins
Slow overall economic growth
For now, sentiment remains fragile. Much will depend on how long the West Asia conflict persists and whether crude prices stabilise in the coming weeks.
(By arrangement with livemint.com)
