Highlights:
Indian stock markets witnessed turmoil on 3rd October, 2024 as Sensex and Nifty opened with heavy losses, taking their downward journey due to increased global geopolitical tensions. The benchmark BSE Sensex tumbled down by 1,264 points while Nifty 50 dived more than 1 percent leaving investors in a huge panic. It is primarily driven by fear and uncertainty generated through the escalating Israel-Iran conflict, which added a lot of glob.
Impact of Iran-Israel Conflict on Global Markets
It is largely because of geopolitical instability in the Middle East that Indian markets have plummeted sharply. During the last few days, Iran’s missile attacks on Israel and Israel’s dire promises of retaliation have rung alarm bells in all financial circles across the globe. The investors are getting scared that the chaos may disrupt the supply of crude oil from the Middle East and may raise the prices of crude oil manifold. While Brent crude increased to $74.82 a barrel on Thursday with a gain of 1.24%, it further fanned fears for major oil-importing nations such as India.
Home Market Review: Sectoral Loss Leaders
Indian Stock Market: Indian indices also saw the broad-based decline in the stock market. Almost every sector saw major losses. The biggest drivers of Sensex’s huge fall were stocks of auto, FMCG, banking, and IT sectors. Some of the major gems of the sell-off have been Tata Motors, Reliance Industries, and Asian Paints, which picked the darker side of investor mood as both global and domestic factors shook the nerves of investors. Nifty Auto and Nifty FMCG index was one of the worst losers, with deep cuts.
Pressure from markets mounts as SEBI introduces new derivatives rules.
Adding to this market stress was the Securities and Exchange Board of India’s recent tightening of derivatives trading norms. New norms include cutting down the number of weekly options contracts and a hike in the minimum trading amount with measures to be taken in order to increase transparency and reduce speculative risks. Many traders and analysts express the feeling that such regulations may smother further innovation in trading strategies; dampening participation in the market even more.
Foreign Investor Sell-Off Worsens the Situation
This was compounded by the inflow of FIIs, who withdrew large amounts of capital from Indian markets. The FIIs sold equities of Rs5,579.35 crore on October 1, which is a sure sign of spiking uncertainty among global investors. Analysts say that a sell-off can be attributed to capital inflows in cheaper Chinese and Hong Kong markets, which are now luring due to recent bullish trends and low valuations.
Way Forward: What to Expect
Market Analysts believe that short-term trend of the stock market will still be dominated by Geopolitical issues. However, if the Israel-Iran conflict escalates even further, then the oil prices would take off pretty rapidly and could start exerting heavy pressure on the Indian economy. But, though, the new guidelines issued by SEBI could offer long-term stability, they are likely to create volatility in the near future as trade starts obeying the new norm.
Technical analysts feel that Nifty 50 had already broken the key supports at 25,500 and selling could be seen to plummet up to 300-500 points further. Investors with long positions should book profit in the short term and await a dip to get again into the market.
A Cautionary Approach for Investors
It is in such uncertain times that the investor needs to be wary. The Indian market has, in the recent past, been so volatile, owing to amalgamation of Middle East tensions, crude oil price hikes, and domestic regulatory changes. Hence, investors need to do well in keeping an eye on geopolitical developments and regulatory changes, which significantly affect markets’ dynamics.
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