Stock Market Crash: ₹10 lakh crore investor wealth wiped out; Here are key triggers

Indian equities opened sharply lower on Monday as geopolitical tensions in West Asia escalated over the weekend, rattling global markets and pushing investors into risk-off mode.

The Nifty extended losses in early trade and slipped below the 24,700 mark, falling to its lowest level in a month as concerns over a widening Iran conflict weighed on sentiment.

The sharp fall in the opening minutes eroded over ₹10 lakh crore in investor wealth.

The sell-off was broad-based. More than 20 Nifty constituents declined between 2% and 7%.

The Nifty Midcap 100 index dropped over 2%, with 96 out of 100 stocks trading in the red. Over 460 stocks in the Nifty 500 trading with cuts.

Sectorally, 14 out of 15 Nifty Auto stocks were lower, while 38 out of 40 Nifty Energy stocks traded with losses. Nifty India Tourism, Nifty Consumer Durables and Nifty Auto were among the worst-performing sectoral indices.

Key factors behind the market crash

Global cues

Global cues turned sharply negative after the US-Iran conflict intensified into a broader regional crisis.

Dow Jones futures were down nearly 690 points in early Monday trade, while S&P 500 futures declined about 100 points and Nasdaq futures fell 480 points, reflecting deep risk aversion.

Crude oil prices jump

Crude oil prices spiked sharply after US and Israeli strikes on Iran over the weekend and subsequent retaliatory missile and drone attacks across parts of the Gulf region, including key hubs such as Dubai and Abu Dhabi, as well as Qatar, Bahrain, Saudi Arabia and Oman.

Brent crude initially surged as much as 12% and crossed $80 per barrel for the first time since June last year before cooling off to trade around 4.5% higher. West Texas Intermediate also pared gains after rising up to 8% earlier in the session.

Iran remains the fourth-largest producer in the OPEC+ grouping, accounting for about 12% of the cartel's output. The country produces roughly 3.3 million barrels per day, or about 3% of global supply, and its largest refinery has a capacity of 5,00,000 barrels per day.

Reports around a potential closure of the Strait of Hormuz, a critical chokepoint that handles about 20% of global oil and LNG supply, added to volatility. However, Iran's foreign minister Abbas Araghchi told Al-Jazeera that there was no intention to shut the Strait.

Analysts at Barclays have said a prolonged disruption could push oil towards $100 per barrel, though prices may retreat if tensions de-escalate.

Rupee weakens

The Indian rupee weakened against the dollar, while government bond yields edged higher amid concerns of a prolonged conflict.

Asian currencies were down 0.2% to 0.6%, and MSCI's Asia-Pacific equity gauge fell 1.5%. The dollar index was marginally lower at 97.9.

FII selling

Foreign institutional investors remained net sellers. On Friday, February 27, FPIs offloaded ₹7,536.4 crore worth of Indian equities, while domestic institutional investors bought ₹12,292.8 crore, according to provisional exchange data.

VK Vijayakumar said that while there have been sectoral variations in FPI flows, with selling seen in IT and buying in financials and capital goods, the escalating Middle East conflict has triggered a risk-off mood in financial markets.

He added that foreign investors are likely to adopt a wait-and-watch approach before making fresh commitments to emerging markets, depending on how the situation evolves and its impact on crude and currency markets.

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