Is The Stock Market Going To Crash Due To The Israel-Iran War? Top 05 Points That Led To Fall In Indian Stock Market
The Indian stock market declined due to various domestic and global factors. Escalating tensions between Israel and Iran in the Middle East impacted sentiments.
Additionally, rising US dollar and Treasury yields, foreign institutional investors pulling out money from the Indian markets, and weakening of the Indian rupee against the dollar put pressure on the indices.
Surging crude oil prices also fueled selling as India imports the majority of its oil requirements. These international and local headwinds led to a fall in the Indian stock market.
The 05 Major Reasons That Lead To Fall In Indian Stock Market:
1. Iran-Israel war
Tension between Iran and Israel is causing selling in the Indian equity market. The rising tension in the Middle East has put doubts regarding geo-political uncertainty in the region.
This geo-political uncertainty is the major reason why investors are actively selling stocks in the Indian market.
The possible war between Iran and Israel has raised concerns about the stability in the oil producing regions and broader Middle East, leading investors to sell equities and move to safer assets as a result of the increased uncertainty.
2. Rise in selling pressure globally
The escalating tensions between Iran and Israel have caused selling to occur across major global stock exchanges. Sandeep Pandey, founder of Basav Capital, noted that after the recent rise in geopolitical tensions in the Middle East.
Additionally, major Asian markets such as the Nikkei, Hang Seng, and Kospi indexes are actively trading under downward pressure in early morning sessions on Monday.
The selling pressure seen globally shows that investors have become concerned about the instability in the Middle East negatively impacting the worldwide economy and corporations. This has led to stocks being actively sold off across bourses as traders move to safer assets amid the uncertainty prevailing in international markets.
3. Rise in US dollar rates
The rising US dollar rates have contributed to selling across global stock markets including India. Avinash Gorakshkar of Profitmart Securities noted that the US dollar has continued strengthening, with the dollar index nearing 106 levels and the US dollar rate touching a 34-year high against the Japanese Yen.
This rising US dollar has caused US Treasury yields to surge higher, actively spurring selling pressure in equity markets worldwide. With the strengthening dollar driving up yields, investors have been actively offloading stocks across all major indices and moving into safe haven assets instead.
Hence, the Indian stock market has also witnessed downward pressure on prices due to the spiking yields resulting from relentless gains in the US currency.
4. Rise in crude oil prices
Crude oil prices have been rising sharply in both domestic and global markets. In March 2024, fuel prices in India increased by around 6% compared to the previous month. The rise has continued in April 2024 as well, with prices already up over 3% for this month so far.
Anuj Gupta from HDFC Securities said that this surge in crude oil prices is resulting in higher domestic fuel rates in India. The increasing trend in global crude prices is exerting upward pressure on inflation in India by driving up transportation and energy costs.
5. Fund Withdrawal by Foreign Investors
FIIs have been withdrawing significant funds from the Indian stock market due to ongoing geopolitical tensions and an appreciating US dollar. According to Avinash Gorakshkar, FIIs sold Indian stocks worth Rs 8,027 crores in the cash segment on Friday and offloaded stocks valued around Rs 2,000 crores in the futures and options segment as well.
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Read moreThe geopolitical uncertainty arising from the Russia-Ukraine war and rising US interest rates which have strengthened the American currency are prompting foreign investors to pull out money from Indian equities.
The selling pressure by FIIs reflects their cautious view on Indian market outlook in the current challenging global macroeconomic environment.
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