As the crisis in West Asia entered its fourth week and drove up crude oil prices, the major indexes Sensex and Nifty finished substantially lower on Monday, following dismal global indications. Investor sentiment was also impacted by persistent withdrawals of foreign funds.
The Nifty as a whole closed at an 11-month low of 22,512.65, down 601.85 points, while the Sensex closed 1,836.57 points lower at 72,696.39.
Following the resignation of its part-time chairman, Atanu Chakraborty, HDFC Bank’s stock declined roughly 2.5% after falling 7.4% in the preceding two sessions. After getting a tax demand of Rs 6,337 crore for the assessment year 2024 from the Income Tax Department, State Bank of India saw a 3.6 percent decline.
Key factors behind the decline
Concerns about supply interruptions related to the ongoing violence caused Brent crude to rise 0.62 percent to USD 112.9 per barrel, staying over USD 110. One of the biggest oil importers in the world, India, is particularly challenged by Brent crude’s current price of about $113 per barrel. Inflation is fueled by persistently rising oil prices, which also weaken the currency, increase external imbalances, and prolong foreign capital outflows.
In the face of worldwide uncertainty, foreign portfolio investors kept selling stocks. Throughout March, FPIs have been net sellers, with outflows totaling Rs 90,152 crore as of March 20. According to analysts, sentiment has been affected by worries about global expansion, rising petroleum prices, and comparatively weaker returns from domestic markets.
At its highest level since early June 2024, the volatility index, which measures market expectations of near-term volatility, increased by 17% to 26.66. Increased uncertainty and risk aversion among investors are indicated by a higher VIX, which frequently results in severe market fluctuations and selling pressure.
Asian markets saw significant declines, with Japan’s Nikkei falling by over 4.6 percent and South Korea’s Kospi falling by almost 6 percent. Wall Street futures were down almost 1.5 percent, suggesting a poor start on Monday, while US markets closed Friday much worse.
Due to pressure from rising petroleum prices and persistent outflows of foreign funds, the rupee dropped 41 paise against the US dollar in early trading, reaching a record low of 93.94. The currency was further impacted by the weakness of domestic stocks.
