Indian equity markets opened sharply lower on Friday, with Sensex and Nifty both seeing one of the sharpest plunges in recent months. The BSE Sensex fell by 1,103.53 points to 80,588.45, while the Nifty 50 fell 320.45 points to close at 24,567.75. The sudden drop was provoked by several reasons, which included heightened geopolitical tensions, poor global cues, high foreign selling, and market-wide panic.
Gift Nifty futures had already indicated a weak opening, trading more than 200 points below Thursday’s close, reflecting widespread bearish sentiment among investors.
1. Israel-Iran Standoff Spooks Global Market with Anxiety
Geopolitical tensions erupted after Israel supposedly conducted airstrikes on Iran’s Natanz nuclear enrichment plant and missile depots. The escalation, reportedly in retaliation against nuclear threats, spooked global investors and fueled a rally in crude oil prices.
“Geopolitical issues have come back to center stage. Investors are factoring in the risk of oil supply disruptions, which have a direct impact on inflation and interest rate expectations,” stated Rajiv Mehta, Chief Strategist at Yes Securities.
World markets responded sharply. The MSCI Asia ex-Japan index fell 0.4% in early trade, as investors gravitated towards safer havens such as gold and the Swiss franc. India, which is a significant oil importer, is still exposed to crude price spurt.
2. Aviation Catastrophe Jolts Market Sentiment
Investor confidence was hit again following Thursday’s devastating crash of an Air India Boeing 787 aircraft in Ahmedabad in which almost all 242 crew and passengers were killed. The crash is being called the deadliest air accident in ten years.
The announcement triggered steep falls in the stocks related to aviation. SpiceJet, InterGlobe Aviation (IndiGo), and Adani Enterprises, which operates several airports, saw their shares fall. Boeing’s shares also fell by 5% overnight, impacting the international aviation industry.
3. Technical Breakdown Signals Weakness
Technically, both Sensex and Nifty broke key support levels, reflecting bearish strength. Experts saw a bearish candle pattern and breakdown below short-term moving averages.
“The short term market texture is not healthy. A decline below 81,500 on Sensex can lead to fresh selling. Below that, the index may test 81,000,” cautioned Shrikant Chouhan, Head of Equity Research at Kotak Securities.
Om Mehra, Technical Analyst at SAMCO Securities, further said, “Nifty has broken down below its 20-day moving average. A break below 24,800 can see 24,500 levels in near future.”
4. FII Selling Intensifies Amid Global Risk-Off Mode
Foreign institutional investors (FIIs) withdrew Rs 3,831 crore worth of Indian equities in the last session, a sign of the overseas move away from riskier assets. Meanwhile, domestic institutional investors (DIIs) remained on the buying side, posting their 18th consecutive session of net buying.
The FIIs-DIIs divergence indicates how vulnerable Indian markets are to external stimuli, including oil price fluctuations and hopes surrounding US Federal Reserve policy shifts.
5. Volatility and Global Economic Worries Montage Pressure
The sudden rise in the Average True Range (ATR) for Nifty indicates elevated intraday volatility. Global economic worries about the US-China trade relationship, increasing energy prices, and ambiguous signals from the US Federal Reserve have put additional pressure.
“RSI divergence at resistance and bearish candlestick formation indicate that markets are overdue for consolidation or a mild correction,” said Hedged.in’s Dr. Praveen Dwarakanath.
The Bank Nifty also continued to slide, falling 377 points to close at 56,082. “Profit booking persists, and any violation below 55,300 may convert the trend from bullish to neutral,” warned Mehra.
Even with positive corporate results and the robust macroeconomic fundamentals of India, the market is predicted to remain range-bound in the short term. Further rise in the Israel-Iran conflict or a sudden spurt in crude prices might raise volatility.
Investors are recommended to keep away from leveraged positions and go for defensive stocks such as FMCG, pharma, and utilities that are less vulnerable to global economic shocks. On the brighter side, India’s consumer inflation slipped to 2.82% in May — its lowest level in more than six years — providing the Reserve Bank of India with some room to maneuver in its monetary policy. Investors are advised to remain on guard, monitor crucial support levels, and pay close attention to events globally as uncertainty remains a bearish influence on sentiment.
