Indian Stock Markets Plunge: Sensex Drops 2000 Points

Indian stock markets have faced a sharp decline due to global tensions and China’s economic stimulus. The Sensex dropped significantly, and foreign investors withdrew funds from India. Domestic factors, including election results and corporate earnings, will also influence the market outlook.

CONTENTS:

• Indian stock markets tumble after record highs.
• Global tensions and China’s stimulus impact Indian markets.
• Domestic factors to shape market outlook.

After reaching new highs, with the BSE Sensex crossing the 85,000 mark, Indian stock markets have recently shown signs of weakness. Last Thursday, the Sensex dropped sharply, falling by 1,769 points, or 2.1%. This decline continued into Friday, with the index decreasing by almost 1%. Over the past five trading days, the Sensex has lost nearly 5%. Additionally, the BSE Midcap index declined by 3.1%, while the Smallcap index fell by 2.3%. The Nifty VIX, an indicator of market fear, surged by 19% during this time, reflecting increased investor uncertainty.

The immediate causes of the market sentiment downturn appear to be global in nature. There are growing concerns about the escalation of the Middle East conflict, with multiple fronts opening up—such as the pager attack, the killing of a Hezbollah leader in Beirut, and a missile strike on Israel. Fears have intensified that Israel might target Iran’s oil infrastructure, which could disrupt global supply.

This has raised worries that the conflict could extend further, threatening crucial trade routes like the Strait of Hormuz, through which about one-third of the world’s crude oil supply passes. As a result, crude oil prices have surged, with Brent crude futures rising by around 8.7% over the past week.

Additionally, developments in China have influenced global markets. The Chinese government recently introduced a series of measures aimed at stabilizing its struggling economy. The People’s Bank of China lowered its policy interest rate from 1.7% to 1.5%, reduced the reserve requirement ratio, and implemented tools to support the stock market. These actions have improved market sentiment, and with attractive stock valuations, investor interest in Chinese markets is increasing.

Last week, the Shanghai Composite Index climbed 20%, while the Hang Seng rose by 11.2%. This renewed interest in Chinese stocks is prompting a rebalancing of portfolios, with foreign investors withdrawing funds from India. Over the past four trading sessions, they sold more than ₹37,000 crore worth of shares, including ₹9,897 crore on Friday alone. Additionally, during this time, India’s stock market regulator introduced measures to limit trading in the Futures and Options segment.

In the coming days and weeks, domestic political and economic factors could impact the markets. The results of the assembly elections in Jammu and Kashmir and Haryana, the first meeting of the newly restructured monetary policy committee, and the corporate earnings season are all expected to influence stock prices.