Amid growing Middle East tensions and fears of a possible Iran-Israel conflict as per market news, the Indian stock market plunged on Thursday, with the Sensex losing 1,361 points (1.62%) to 82,905.09 and the Nifty 50 falling 413.95 points (1.60%) to 25,382.95.
Finance Market collapse that was on the cards
Due to negative international cues, the Indian stock market saw a severe collapse on Thursday. Growing geopolitical tensions in the Middle East stoked worries of a full-fledged conflict between Iran and Israel, and the benchmark indices, the Sensex and Nifty 50, opened sharply down. The new regulatory amendments for derivatives trading imposed by SEBI further depressed market sentiment.
The Sensex and Nifty 50 fall more than 1.50%
The Nifty 50 fell 413.95 points, or 1.60%, to trade at 25,382.95, while the Sensex down 1,361 points, or 1.62%, to 82,905.09. The Nifty 50 has dropped 3% over the past four days, which is indicative of the continued volatility in the market.
Due to negative international cues, the Indian stock market saw a severe collapse on Thursday. Growing geopolitical tensions in the Middle East stoked worries of a full-fledged conflict between Iran and Israel, and the benchmark indices, the Sensex and Nifty 50, opened sharply down. The new regulatory amendments for derivatives trading imposed by SEBI further depressed market sentiment.
The Sensex and Nifty 50 fall more than 1.50%-market news
The Nifty 50 fell 413.95 points, or 1.60%, to trade at 25,382.95, while the Sensex down 1,361 points, or 1.62%, to 82,905.09. The Nifty 50 has dropped 3% over the past four days, which is indicative of the continued volatility in the market.
Factor’s causing this crash
1. Increasing Tensions Between Iran and Israel
As a result of Iran firing almost 200 missiles at Israel on October 1 in retaliation for the death of Hezbollah leader Hassan Nasrallah, geopolitical tensions in the Middle East escalated to unprecedented levels. Fears of a wider conflict increased as Israel promised to retaliate. Israel is reportedly targeting the Hezbollah organization with limited ground incursions into Lebanon. Furthermore, the Guardian revealed that an Israeli attack on a Beirut health center resulted in six fatalities and seven injuries, heightening fears of a full-scale conflict in the area.
2. SEBI's Tighter Regulation of Trading in Derivatives
Tightening controls on stock derivatives trading was the goal of SEBI’s recent rule introduction, which is predicted to increase trading costs and put investors at a higher entrance hurdle. One weekly options contract per exchange and a nearly three-fold increase in the minimum trading amount are two of the new recommendations implemented by SEBI.
Puneet Sharma, CEO and fund manager at Whitespace Alpha, says that although these steps aim to strengthen market resilience, traders may find them difficult to use. More stringent regulations on capital adequacy, transparency, and leverage may make it harder for investors to assess their own risk tolerance, which would inhibit the development of novel trading methods, according to Sharma. He underlined that excessive regulation may lower participation and stifle market dynamism, which would hurt India’s ability to compete in the world derivatives market.
3. Increasing Costs of Crude Oil
Fears of a possible disruption in Middle Eastern supplies, which may have serious ramifications for global markets, especially for importers like India, caused crude oil prices to soar. US West Texas Intermediate crude increased 1.03% to $70.82 a barrel, while Brent crude futures increased 0.87% to $74.54 a barrel. India is particularly concerned about the increase in crude prices because it has a significant influence on the country’s import bill and affects industries like energy, gas, and oil.
4. Ongoing FII Sales
On October 1, foreign institutional investors (FIIs) continued their selling binge in Indian stocks, unloading shares valued at Rs 5,579.35 crore. On the other hand, domestic institutional investors (DIIs) continued to be net buyers, acquiring stocks valued at Rs 4,609.55 crore, providing some market stabilization throughout the sell-off.
5. Important Nifty & Bank Nifty Levels to Monitor
Observing the Nifty Technical Outlook According to Kunal Kamble, Senior Technical Research Analyst at Bonanza, there has been a bearish trend since the Nifty Index closed down for three days in a row. With a 27.39% drop in open interest since the rollover, the index has lost roughly 0.94% of its gains, indicating that many long positions are likely being squared off. Nonetheless, 51.38% of long positions are still open. Technically, the price is trading close to the 20 EMA and the 0.618 Fibonacci retracement level, indicating solid support at this level.
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