The Sensex declined more than 600 points to slip below the 74,600 mark, while the Nifty 50 fell over 190 points to trade below 23,450. This came as India VIX, which measures market volatility, rose more than 1% to hover near 18.93 in morning trade.
Shares of Tata Steel, Zomato-parent Eternal, Bharat Electronics (BEL), Bajaj Finance, M&M, Maruti Suzuki, Power Grid, Hindustan Unilever, UltraTech Cement, SBI, Bajaj Finserv, and Tech Mahindra declined up to 2%, emerging as the top losers on the Sensex. Bucking the trend, TCS and Infosys traded with marginal gains. The bearish sentiment was broad-based, with the Nifty Midcap 100 and Nifty Smallcap 100 indices dropping around 1% each.
All sectoral indices traded in the red, with the Nifty FMCG, Nifty Auto, Nifty Realty, and Nifty Metal indices falling more than 1% each. Around 1,879 stocks declined on the NSE, while 598 advanced and 83 remained unchanged.
“While fourth-quarter earnings continue to underscore the resilience of domestic economic momentum, market focus is increasingly pivoting toward mounting inflationary pressures. Concerns over potential earnings downgrades for Q1FY27 are gaining traction, driven by higher-than-anticipated WPI readings, the gradual pass-through of elevated fuel prices, and persistently firm bond yields,” said Vinod Nair, Head of Research at Geojit Investments.
Key factors dampening the sentiment on Dalal Street today:
1) Rupee weakens to a fresh low, inches closer to 97
Rupee continued its free fall against the US dollar, hitting a fresh lifetime low of 96.8650 on Wednesday and eclipsing its previous all-time low of 96.6150, which it had hit yesterday. The currency is down 6% since the Iran war began in late February.
Rupee’s weakness comes as elevated crude oil prices and continued pressure on capital flows kept the currency under stress, said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities. “Sustained higher crude prices are increasing concerns over India’s import bill and widening trade deficit, which is keeping sentiment weak for the rupee,” he said.“Market participants continue to prefer dollar buying and rupee selling as a hedge against ongoing volatility and external sector pressure. The broader trend remains weak, with the rupee expected to trade in a range of 96.25–97.00 in the near term,” according to the analyst.
2) Bond yields remain high
The 30-year US Treasury yields rose to 5.20% late on Tuesday, their highest level since 2007. Yields on the benchmark 10-year bonds, which have an impact on the mortgage rates, meanwhile, surged to their highest level in over a year to about 4.67%. While the bond yields have slightly cooled down on Wednesday morning, the yields remain elevated.
High bond yields typically make bonds attractive to investors, which in turn can lead to some downturn in equity markets.
3) Iran-US conflict
US President Donald Trump told lawmakers at the White House that the country will “end the war very quickly” with Iran. “There’s so much oil out there, they’re going to come plummeting down..We’re going to end that war very quickly. They want to make a deal so badly…You are going to see oil prices plummet. They’re going to come down. There’s so much oil out there, they’re going to come plummeting down,” he said at a press conference. This came after he threatened Iran, saying the US may launch new attacks if Tehran fails to agree to some of the terms of the peace deal.
Meanwhile, US Vice President JD Vance said that the Iran conflict will not become a “forever war”. “We’re going to take care of business and come home,” he said during a White House briefing.
Iran, however, scaled up its threats. “With lessons learned and knowledge we gained, return to war will feature many more surprises,” Iran’s Foreign Minister Seyed Abbas Araghchi said in a post on X.
4) Oil prices hold above $110/barrel
Brent crude declined marginally but remained above $110 per barrel. WTI Crude, meanwhile, hovered above $104 per barrel. Oil prices continued to remain elevated above $100 per barrel level amid the prolonged blockade over the Strait of Hormuz, a narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman that handles over 20% of the world’s daily oil and gas shipments.
5) FII selling resumes
Foreign investors remained net sellers of Indian equities on Tuesday, selling shares worth Rs 2,457 crore on Dalal Street. This comes after a three-session buying streak during which FII bought Indian shares worth Rs 5,240 crore.
However, foreign investors have mostly remained bearish on Indian markets this month so far, remaining net sellers of Indian equities in eight out of 12 sessions so far in May.
6) Global market crash
Dalal Street accompanied its global peers, which only declined sharply. In Asia, South Korea’s Kospi crashed more than 2% while Japan’s Nikkei fell around 1.5%. Hong Kong’s Hang Seng and China’s Shanghai Composite dropped around 0.5% each.
Wall Street closed in the deep red yesterday, with tech-heavy Nasdaq declining 0.9% and S&P 500 falling 0.7%. European markets, however, closed mixed on Tuesday, with the UK’s FTSE and Germany’s DAX closing in the green with marginal gains.
What lies ahead?
Technically, the 23,400–23,300 zone remains a crucial support band for the bulls, and a decisive breach could drag Nifty toward 23,100–23,000, said Rajesh Palviya, Head of Research at Axis Direct. “On the upside, unless Nifty reclaims 23,750 decisively, momentum is likely to remain capped, while only a sustained move above 23,900–24,000 would meaningfully improve the near-term outlook,” he said.
Going ahead, Nifty’s failure to move above the recent breakdown area of 23,800 – 23,900 will keep the bias corrective, and the index will consolidate with downward bias in the range of 23,200 – 23,900, said Bajaj Broking. It added that the benchmark index needs to start forming higher highs and higher lows on a sustained basis in the daily chart and a move above the breakdown area of 23,800 – 23,900 to signal a pause in the recent downtrend.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times)
