The benchmark stock indices crashed over 3% Thursday to their lowest levels since February 16, 2024 as the war in West Asia escalated, sending crude prices above $110 a barrel. With this, the benchmark indices washed out the near 3% gain they had notched up over the last three days.
This was the steepest single-day fall for the market since June 4, 2024 when voting trends during the Lok Sabha elections had shown an unexpectedly narrow win for the BJP.
The surge in crude prices and HDFC Bank’s stock crash have dented the slight positivity seen during the market’s 3-day relief run, and the hawkish policy outlook provided by the US Federal Reserve – it kept interest rates unchanged at its latest policy meeting – further hurt investor sentiment.
The Nifty 50 index, which had opened over 2% lower, ended the session at 23,002.15 points, down 775.65 points or 3.3% as selling pressure intensified through the session. The BSE’s Sensex index closed at 74,207.24 points, down 3.3%.
The rupee also slumped to a record low against the dollar, breaching the 93 mark for the first time. According to Goldman Sachs, the rupee might weaken to as low as 95 against the greenback over the next 12 months if the West Asian conflict draws on.
The selling pressure engulfed the entire stock market, with all Nifty 50 constituents, barring ONGC, ending lower. Index heavyweights such as L&T, Reliance Industries, and ICICI Bank lost up to 5%. All of NSE’s sectoral indices ended deep in red, with automobiles, banking, financial services, and IT among the worst hit. Broader market indices also slumped, and the India VIX, which indicates the volatility in the market, skyrocketed nearly 22% to its highest level in about a week. Around 81% of the stocks traded on the NSE fell during the session.
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The HDFC Bank’s stock fell as much as 9% in early trade as Chakraborty’s comments sparked fears of potential regulatory lapses in the backend of the bank. The stock, which has among the highest weightage in the benchmark indices, was among the biggest laggards. The company’s American Depository Receipts had fallen as much as 7% overnight in the US.
In a conference call with analysts and investors earlier in the day, the bank said Chakraborty’s resignation was not due to regulatory issues at the bank. The bank said it was unaware of the issues that Chakraborty had stated in his letter. The stock recovered a bit post that and was down 4% at its best, but eventually ended over 5% lower.
Crude prices rose as much as $112 a barrel and natural gas prices gained 5% after strikes on Iran’s South Pars gas field, which is the largest in the world. Iran retaliated by targeting energy sites in Qatar, Saudi Arabia, Kuwait and the UAE.
Indian markets have already been reeling under high crude prices and the country has been hit by a shortage of natural gas. India imports the majority of its crude oil from West Asia and natural gas from Qatar.
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While India, like many other countries, had been in talks with Iran for safe passage of India-bound shipping vessels via the Strait of Hormuz, the latest escalation is likely to further disrupt these efforts.
Meanwhile, the US Federal Reserve kept interest rates unchanged at its latest policy meeting, striking a hawkish tone. Fed President Jerome Powell expressed caution over inflation spiking due to higher energy prices, upwardly revising the inflation forecast for 2026 to 2.7%.
“In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy,” Powell said at a press conference.
Higher rates in the US make emerging markets such as India less attractive for foreign investors due to lesser interest rate differential. It comes at a time when persistent foreign outflows have kept the Indian market under significant pressure. FIIs have already dumped shares worth over $8 billion so far in March on a net basis, the highest since they dumped $9 billion of shares in January 2025.
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