The Indian stock market experienced a dramatic collapse on Wednesday, March 4, shocking investors. Global tensions, a surge in crude oil prices, and selling by foreign investors combined to cause a massive market to witness another day of sell off. The Sensex and Nifty fell by nearly 2% as trading began in the morning, wiping out approximately ₹8 lakh crore of investor wealth.
On the morning of March 4th, the Bombay Stock Exchange (BSE) Sensex fell 1,710 points to 78,529, its lowest level since April last year. The Nifty 50 also slipped 477 points to 24,389. For the first time in nearly seven months, the Nifty fell below 24,400. This sharp decline reduced the total market cap of BSE-listed companies to approximately ₹449 lakh crore.
Middle East tensions became the biggest reason
The biggest reason for the market decline was the rising war tensions in the Middle East. The situation has worsened following military action by the US and Israel against Iran. Fears of retaliatory attacks and disruptions in oil supplies have increased anxiety in global markets, which has directly impacted the Indian market.
Crude Oil Prices Rise
More than 20% of the world’s oil is supplied through the Strait of Hormuz. Fears of a threat to this route have pushed Brent crude prices above $82 per barrel. India meets approximately 85% of its oil needs through imports, and rising oil prices could increase inflation and the current account deficit.
Pressure on Rupee and Foreign Institutional Investors (FIIs) Selling
Amid rising oil prices and geopolitical tensions, the rupee has fallen to a record low of 92.05 against the dollar. Foreign institutional investors (FIIs) have been selling continuously, further weakening market sentiment. Although domestic investors (DIIs) have been buying, their efforts have not been sufficient to stem the decline.
Rupee Falls
According to Reuters, the Indian rupee fell 68 paise to close at 92.15 against the US dollar on Wednesday. This pushed the dollar index to its highest level in several months. Investors were concerned about rising inflation due to the US-Iran war. The weakening rupee means the Indian currency is losing value against the dollar. This could lead to foreign investors withdrawing money from the Indian stock market. This also increases the costs of import-dependent Indian companies, potentially reducing their profits.
