Why Is The Stock Market Falling?

The Indian stock markets plunged sharply on Monday as high prices of crude oil and negative global cues prompted widespread selling activity.

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As on 10:30 a.m., the Sensex slumped by 1,061.12 points or 1.37% to settle at 76,267.07, whereas the Nifty fell by 306.15 points or 1.27% to 23,870.

All 16 major sectoral indices traded in negative territory during the session. Broader markets also remained under pressure, with the Nifty Smallcap100 index falling 1.9% and the Nifty Midcap100 declining 0.93%.

Crude Oil Prices Rise Sharply

Global crude oil prices moved higher after renewed concerns over the U.S.-Iran conflict and supply disruptions in West Asia.

Brent crude futures were trading 4.32% higher at $105.7 per barrel during the session. Rising crude prices increased concerns over inflation, higher import costs and pressure on oil-importing economies such as India.

Strait of Hormuz, an important oil shipping channel, was also the focus of attention amidst the ongoing geopolitical uncertainties prevailing in the region.

Rupee Weakens Against U.S. Dollar

The Indian rupee also came under pressure and weakened against the U.S. dollar in early trade.

At the interbank foreign exchange market, the rupee opened at 94.97 against the U.S. dollar and later traded at 94.90. Rising crude oil prices, foreign fund outflows and a stronger dollar index weighed on the domestic currency.

Foreign Investors Continue Selling

Foreign institutional investors remained net sellers in the Indian equity market. According to exchange data, foreign institutional investors sold equities worth ₹4,110.60 crore on Friday. Continued foreign capital outflows impacted market sentiment and added pressure on benchmark indices.

Data showed foreign portfolio investors sold equities worth ₹14,232 crore through secondary markets during the first eight days of May.

Oil, Travel And Jewellery Stocks Decline

Shares of oil marketing companies came under pressure amid higher crude oil prices. Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation declined around 2.6% each during the session.

Travel and hospitality-related stocks also traded lower. Shares of Indian Hotels, Lemon Tree Hotels, Chalet Hotels, Thomas Cook and Yatra Online declined between 1.2% and 5.3%, while InterGlobe Aviation fell 4%.

Jewellery stocks witnessed sharp selling pressure. Titan, Senco Gold and Kalyan Jewellers declined between 7.6% and 11%. However, Hyundai Motor India gained 2.6% after the company reported quarterly earnings.

Volatility Index Rises

The India VIX, which measures market volatility, rose 12% to 18.82 during the session. An increase in the volatility index indicates that there is more uncertainty prevailing in the market and that sharp movements in prices can be expected soon.

The investors kept tracking oil prices, foreign fund flows, and geopolitical situations as major factors influencing the direction of the markets.