Market crashes due to heavy selling in private banks and financial stocks. Sensex falls over 600 points, Nifty also in the red. Know the 6 major reasons behind the fall.
On Monday, the first trading day of the week, the Indian stock market registered a sharp decline. The market went into the red right from the early trade, creating an atmosphere of concern among investors.
At 9:30 AM, the Bombay Stock Exchange's (BSE) benchmark index Sensex was trading at 77,520, down by a significant 631 points or 0.81 percent.
Meanwhile, the National Stock Exchange's (NSE) Nifty also fell by 154 points or 0.64 percent to 24,183. The main reason for this market decline was heavy selling in banking and financial stocks.
Sector-wise, the most pressure was seen on private banks. The Nifty Private Bank index recorded a steep fall of 2.65 percent. Besides this, selling dominated the financial services, auto, and realty sectors as well.
However, amidst this decline, some sectors also saw a rise. The Nifty PSU Bank, Pharma, IT, and Metal indices were trading in the green.
According to experts, several domestic and international factors are responsible for this major market downturn. Let's look at these 6 key reasons in detail.
Tensions between Iran and the United States deepened over the weekend. Reports of continuous US attacks on Iran have raised global concerns.
Meanwhile, Iran's Islamic Revolutionary Guard Corps (IRGC) has claimed explosions on two oil tankers passing through the Strait of Hormuz, further escalating geopolitical tensions.
The rising tension in the Middle East has had a direct impact on crude oil prices. Brent crude prices jumped more than 2 percent to $90.19 per barrel.
A rise in crude oil prices is a matter of concern for a major importing country like India, as it poses a risk of increasing inflation.
On Monday morning, not only the Indian market but also major Asian markets saw heavy pressure. Japan's Nikkei and South Korea's Kospi fell by more than 4 percent.
Prior to this, the sentiment in the US markets was also weak. The S&P 500 and Nasdaq had fallen by more than 1 percent, the impact of which was also seen on Asian markets today.
The biggest reason for the decline in the domestic market was the sharp sell-off in banking stocks. The June quarter results of some major private banks did not meet investors' expectations.
Following disappointment from the results, shares of HDFC Bank and Axis Bank registered a sharp fall of up to 5 percent. Kotak Mahindra Bank's stock also fell by more than 3 percent.
The increase in US bond yields also worked to put pressure on the market. The yield on the 10-year US Treasury bond rose to 4.551 percent.
When bond yields rise, investors find it safer to move money from the equity market to bonds, which increases selling in stocks.
The impact of expensive crude oil and caution from foreign investors was also seen on the Indian rupee. In early trade on Monday, the rupee weakened by 11 paise to 96.41 against the dollar. A weak rupee also negatively affects market sentiment.
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