Fear gauge spikes 26% as Sensex posts worst fall in over two months; 46 Nifty stocks end lower
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Indian equities faced their steepest decline in more than two months on Wednesday after U.S. president Donald Trump declared the peace memorandum with Iran was "over", marring hopes of a sustained de-escalation in West Asia and triggering a sharp rally in crude oil prices that rattled global financial markets.
The BSE Sensex plunged 1,677.12 points, or 2.15%, to close at 76,503.60, while the Nifty 50 slumped 516.65 points, or 2.12%, to settle at 23,882.05, marking their biggest single-day fall in over two months. The selloff was broad-based, with 46 of the 50 Nifty constituents ending in the red, as investors rushed to mitigate risk amid fears of a fresh escalation in the U.S.-Iran conflict.
The pressure spilled over to the currency market, where the rupee tumbled 63 paise to settle at 95.59 (provisional) against the U.S. dollar, tracking higher crude prices and a stronger greenback.
Peace hopes unravel, oil jumps over 6%
Markets came under pressure after the US launched fresh strikes on more than 80 Iranian military targets late Tuesday, prompting Iran to retaliate with missile and drone attacks on US bases. Investor sentiment deteriorated further after President Donald Trump declared the US-Iran peace memorandum 'over', although he indicated diplomacy could continue if Tehran was willing to negotiate.
The developments prompted traders to quickly reprice geopolitical risk, sending Brent crude surging more than 6% to around $79 a barrel, its sharpest single-day jump in weeks. The rally reflected fears that renewed hostilities could keep energy markets on edge even without an immediate disruption to oil supplies.
The risk-off sentiment reverberated across global markets. Japan's Nikkei 225 fell 2.11%, while South Korea's Kospi plunged 5.35%, hit by heavy selling in technology stocks. European equities also traded lower as investors reassessed geopolitical risks, although Hong Kong's Hang Seng bucked the trend with a 2.99% gain, supported by gains in Chinese technology shares.
Banks, financials bear the brunt
The selloff spared no sector.
Banking and financial stocks led the decline, with the Nifty PSU Bank index dropping 2.72%, followed by Nifty Private Bank (-2.52%), Financial Services (-2.45%), FMCG (-2.49%), Media (-2.31%), Auto (-2.23%) and Oil & Gas (-2.23%). Defensive pockets also came under pressure, though IT (-1.37%) and Pharma (-0.97%) outperformed the broader market.
Among Nifty stocks, IndiGo was the biggest loser, sliding 5.10%, as higher oil prices renewed concerns over aviation fuel costs. It was followed by Jio Financial Services (-5.02%), Shriram Finance (-4.86%), Maruti Suzuki (-3.88%) and Hindustan Unilever (-3.36%).
Only four stocks escaped the rout. ONGC gained 1.15%, benefiting from the surge in crude prices, while Bajaj Auto , Hindalco and Coal India posted modest gains.
Volatility to remain elevated
Vishnu Menon, SEBI-registered research analyst and founder of Trader Prepares, said the day's decline reflected a sharp shift towards risk aversion following the latest geopolitical developments.
"The selloff was broad-based, with every sectoral index closing in the red. Banking and financial stocks led the fall, while even defensive sectors were not spared. As geopolitical anxiety surges, investors are rushing to safe-haven assets, triggering a sharp spike in crude oil prices and panic selling across global exchanges," he said.
Menon said investors should closely track developments in the Gulf, crude oil prices, the rupee, foreign institutional investor flows and the June-quarter earnings season for cues on market direction.
"Crude oil trajectories and further developments in the Gulf will dictate the narratives around inflation, interest rates and FII flows. With sentiment remaining fragile, volatility is likely to stay elevated," he added.