Indian stock markets drop to six-month lows as crude prices spike on US-Iran tensions

The Indian stock market dropped 1.6% on Monday, hitting its lowest level in nearly six months due to heavy selling caused by high crude prices and global concerns. This followed a 1.7% fall on Thursday that pushed the market's losing streak to seven weeks.

Market Impact

BSE's Sensex dropped 1.5% or 1,124.02 points to end at 72,771.72, while the Nifty 50 fell 1.6% to close at 22,780.25, wiping out nearly Rs 9 lakh crore of investor wealth. Vinod Nair, Head of research at Geojit Investments, noted that bears remained in control as the market crossed a key psychological support level. All sectoral and thematic indices closed in the red, with sectors like banks, financial services, IT, oil and gas, and metals falling between 1% and 2%. The India VIX volatility indicator rose 12.5%, and the Indian rupee dropped to a more than one-week low before state-owned banks intervened, reportedly for the Reserve Bank of India, helping the currency settle down 0.2% at 95.98 against the dollar.

Crude and Global Conflict

US President Donald Trump rejected a seven-day ceasefire proposal and reopening of the Strait of Hormuz from Iran on Saturday due to too many concessions asked without meeting terms. However, Trump told Axios on Sunday that US negotiators expect more talks this week. Despite this, the rejection pushed crude prices over $108 per barrel on Monday. Kranthi Bathini, Equity Strategist at WealthMills Securities, stated that crude above $100 creates short- to medium-term selling pressure in India. Foreign investors have dumped $2.2 billion of Indian shares this month, while secondary market liquidity was also affected by a booming IPO market.

Context

India imports most of its crude oil, making the economy vulnerable to global oil price spikes that drive up inflation and hurt consumer spending. Rising global bond yields and domestic liquidity measures by the RBI, including a record Rs 1 lakh crore annual net bond sale, have added further pressure to the financial markets.