A sharp wave of selling pressure hit the Indian stock market on Monday, 11 May, pulling benchmark indices — Sensex and Nifty 50 — down by more than 1 per cent during intraday trade.
The 30-share Sensex tumbled nearly 1,200 points, or over 1 per cent, to touch an intraday low of 76,166, while the NSE’s Nifty 50 dropped more than 1 per cent to 23,845. Broader markets also witnessed weakness, with the BSE Midcap and Smallcap indices falling by up to 1 per cent.
The total market capitalisation of BSE-listed companies declined to around Rs 468 lakh crore from Rs 473.5 lakh crore in the previous session, eroding investor wealth by more than Rs 5 lakh crore.
Why Did The Indian Stock Market Fall?
Here are five major reasons behind the sharp decline in the stock market:
1. US-Iran Tensions Escalate
Expectations of progress in US-Iran discussions weakened after US President Donald Trump reportedly rejected Iran’s peace proposal, terming it unacceptable.
According to reports, analysts fear that failed negotiations could trigger stronger military action against Tehran.
Trump reportedly reiterated that the US remains committed to confiscating Iran’s enriched uranium stockpile, while Israeli Prime Minister Benjamin Netanyahu stated that Iran’s nuclear programme continues to pose a threat despite recent military developments.
Experts said persistent uncertainty surrounding the West Asia conflict has kept crude oil prices above the $100-per-barrel mark for over two months, intensifying concerns over inflation and slowing economic growth.
2. Prime Minister Narendra Modi’s Austerity Appeal
Market sentiment was also impacted by Prime Minister Narendra Modi’s recent appeal urging citizens to practise restraint in fuel consumption and avoid purchasing gold for a year amid the ongoing West Asia crisis.
“I think the market today has been impacted more by Prime Minister Narendra Modi’s austerity call than by the non-resolution of the Iran crisis. The Prime Minister urged people to cut down on the consumption of petrol, diesel, gold and even foreign travel. In brief, it is an austerity call,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
“Such a call has negative implications for economic growth and, consequently, for corporate earnings as well. That, in my view, is affecting the market more than the geopolitical uncertainty surrounding Iran,” Vijayakumar said.
3. Surge In Crude Oil Prices
Brent crude prices jumped over 4 per cent, reclaiming the $105-per-barrel level as uncertainty over US-Iran talks intensified and oil supplies through the Strait of Hormuz remained constrained.
For India, which imports nearly 85-90 per cent of its crude oil requirements, elevated oil prices pose a major macroeconomic challenge.
4. Weakening Rupee
The Indian rupee opened 40 paise lower at 94.88 against the US dollar on Monday due to rising crude oil prices and increased demand for the US currency.
A weaker rupee can accelerate foreign fund outflows, fuel inflationary pressure, and potentially force tighter monetary measures.
5. Technical Weakness In Markets
The Nifty 50 slipped below the key 24,000 support level and breached the 23,900 mark during the session. Market analysts believe defending the 24,000 level remains crucial.
“Unless and until a daily close above 24,340 is recorded, the prevailing bias stays cautious, with 23,800 the next pocket of support should that floor crack,” said Rajesh Palviya, Head of Research, Axis Direct.
According to Bajaj Broking, the Nifty 50 has remained stuck in a triangular consolidation pattern within the 23,800-24,400 range over the past three weeks.
The brokerage expects stock-specific movement to continue during the ongoing quarterly earnings season.
“Only a breakout and a close above 24,400 will open further upside towards 24,600 and 24,800 levels. Failure to move above 24,400 will signal an extension of the last three weeks’ consolidation in the 24,400-23,800 range. Short-term support is placed at 23,800, being almost identical to the low of the last three weeks,” said Bajaj Broking.