The Indian stock market took a sharp hit on Thursday, October 3, 2024, with both Sensex and Nifty 50 plunging over 1% amid weak global cues and escalating tensions between Iran and Israel.
The Sensex opened 1.5% lower, losing 1,264.20 points to reach 83,002.09, while the Nifty 50 dropped by 1.33%, or 344.05 points, to 25,452.85. This marks the fourth straight session of losses, with the Nifty 50 falling over 3% in just four sessions.
5 Key Factors Behind the Market Crash
1. Geopolitical Tensions – Iran-Israel War
The ongoing conflict between Iran and Israel has rattled global markets, raising fears of a full-fledged war in the Middle East. Iran’s retaliatory missile strikes and Israel’s potential counterattacks have raised concerns about the stability of the region, especially as Iran is a key player in the global oil supply chain. The uncertainty surrounding further escalation has left investors uneasy, driving them away from riskier assets like equities.
2. Rising Crude Oil Prices
As tensions in the Middle East escalate, crude oil prices have spiked, with Brent crude reaching $74.82 per barrel. Higher oil prices negatively impact oil-importing nations like India, where over 80% of oil is imported. Rising crude prices lead to increased inflationary pressures, higher transportation and manufacturing costs, and lower corporate profitability, especially in sectors like automobiles, aviation, and FMCG.
3. SEBI’s New F&O Rules
The Securities and Exchange Board of India (SEBI) recently introduced stricter guidelines for equity derivatives trading, including limiting weekly options contracts and raising the minimum trading amount. These rules, aimed at reducing retail speculation in the futures and options (F&O) market, have created uncertainty among traders. Many fear reduced liquidity and lower turnover in the F&O segment, further affecting market sentiment.
4. FII Selling
Foreign institutional investors (FIIs) have extended their selling spree, offloading equities worth ₹5,579.35 crore on October 1, 2024 alone. This marks the third consecutive day of FII selling, as investors shift focus to safer, less volatile markets amid geopolitical tensions and rising global oil prices. This heavy selling pressure has contributed to the significant drop in Indian markets.
5. Technical Weakness
From a technical analysis standpoint, the Nifty 50 broke key support levels at 25,700 and 25,500, which triggered additional selling. Analysts are now watching whether further support levels at 25,200 hold, warning that a breach could lead to additional declines. Traders are advised to remain cautious and avoid aggressive long positions until the market stabilizes.
Impact of Key Factors on the Indian Stock Market
| Factor | Impact | Result |
|---|---|---|
| Geopolitical Tensions | Increased global uncertainty | Flight to safety, fall in equities, rise in gold |
| Rising Crude Oil Prices | Higher input and transportation costs | Inflationary pressures, reduced corporate margins |
| SEBI F&O Regulations | Tighter trading norms | Reduced liquidity, lower turnover in F&O market |
| FII Selling | Heavy selling by foreign investors | Sharp decline in stock prices, weakening of INR |
| Technical Breakdown | Breach of key support levels | Additional selling pressure, market correction |
Conclusion
The combination of geopolitical risks, rising oil prices, stricter SEBI regulations, and FII outflows has created a perfect storm for Indian equity markets. The Sensex and Nifty 50 are now in a correction phase, and further downside could be expected if geopolitical tensions worsen or if oil prices continue to rise.
Investors should focus on diversification, safe-haven assets like gold, and maintain caution in the near term until clearer market direction emerges.
