Sensex down over 1,000 pts, Nifty near 23,700: Renewed Mideast tensions among 10 key factors behind market decline

Sensex, Nifty pulled back after a sharp rally in the previous session, as renewed Mideast tensions clouded ceasefire optimism.

The benchmark equity indices Sensex and Nifty declined on Thursday, giving up gains after a sharp rally in the previous session, as the geo-political uncertainty was still high after Iran’s threat to step out of the talks if Israel kept bombing Lebanon, keeping investors wary of the opening of the Strait of Hormuz.

At 2:30 pm, the Sensex fell 1,062.55 points or 1.37 percent to 76,500.35, while the broader Nifty declined to 23,722.25, down 275.10 points or 1.15 percent.

Eleven of the 16 major sectoral indices were in the red. Financial stocks slipped about 1 percent after rising 5.5 percent in the previous session.

In the broader market, the Nifty smallcap100 index rose 0.3 percent, while the Nifty midcap100 index was flat.

Among individual stocks, HDFC Bank and ICICI Bank declined 1.8 percent and 1.4 percent, respectively. Honasa Consumer gained 4 percent following a strong quarterly update.

On Wednesday, both benchmark indices had surged about 4 percent after oil prices declined on reports of a ceasefire agreement between the United States and Iran, triggering a global rally.

Key factors behind market decline

1) Tensions in West Asia: Fresh concerns emerged after US President Donald Trump said American forces would remain deployed in and around Iran until a “real agreement” is fully implemented, warning of stronger action if commitments are not met. Iran’s signals of potential ceasefire breaches amid continued Israeli strikes in Lebanon have added to uncertainty, limiting investor risk appetite.

“All U.S. Ships, Aircraft, and Military Personnel… will remain in place in, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with,” Trump said in a Truth Social post.

“If for any reason it is not… then the ‘Shootin’ Starts,’ bigger, and better, and stronger than anyone has ever seen before.”

Addtionally, Israel has also dismissed Pakistan’s claims of playing a key mediating role in the recent US-Iran ceasefire, with its Ambassador to India Reuven Azar questioning Islamabad’s credibility as a facilitator.

Israel rejects Pakistan’s mediator role in US-Iran ceasefire

2) Rise in crude oil prices: Brent crude rose 2.09 percent to USD 96.73 per barrel. Higher oil prices are seen as negative for India, as they can widen the fiscal deficit, push up inflation and impact economic growth.

3) Weak global cues: Asian markets, including South Korea’s Kospi, Japan’s Nikkei 225, Shanghai’s SSE Composite and Hong Kong’s Hang Seng, were trading lower after the previous session’s rally. US market futures also indicated a weak start.

4) Persistent FII selling: Foreign institutional investors sold equities worth Rs 2,811.97 crore on Wednesday. Sustained outflows by FIIs tend to put pressure on domestic markets as they reduce liquidity and signal cautious global investor sentiment.

5) Rupee declines: The rupee depreciated 17 paise to 92.71 against US dollar as the fragile ceasefire and Iran’s threat to step out of the talks if Israel kept bombing Lebanon, kept investors wary. At the interbank foreign exchange market, the rupee opened at 92.63 against the US dollar, then gained ground to touch 92.71 against the US dollar in initial trade, registering a gain of 17 paise over its previous close.

6) India VIX rise: The India VIX, a measure of market volatility, rose more than 3 percent to 20.29 level. A higher VIX indicates increased uncertainty and risk perception among investors, often leading to sharper market swings.

7) Sensex expiry: Thursday also marks the Sensex derivatives expiry, which typically leads to higher volatility due to the unwinding or rollover of positions.

8) Profit booking: Investors also booked profits after five consecutive sessions of gains in the domestic market. Extending gains for the fifth straight session on Wednesday, the Sensex jumped 2,946.32 points or 3.95 percent to settle at 77,562.90, marking its strongest single-day rise in five years. During the session, it climbed 3,018.96 points or 4 percent to 77,635.54. The Nifty advanced 873.70 points or 3.78 percent to close at 23,997.35, its best single-session gain in 11 months. It rose 901.5 points or 3.89 percent to 24,025.15 in intra-day trade.

9) Selling in IT shares: The Nifty IT index fell 1.3 percent ahead of earnings from Tata Consultancy Services due after market hours. Selling in the heavyweight IT shares also pulled the benchmarks lower.

10) Sharp selling in Bank stocks: Financials saw heayy selling pressure in today’s session. Bank Nifty was down nearly 2 percent, with all its 14 constituents trading in the red. The Nifty PSU bank and the private bank index also slipped up to 2 percent.

Technical Outlook

According to Anand James, Chief Market Strategist at Geojit Investments, resistance was seen near the 23,950 level, indicating signs of exhaustion in the recent upmove. He said declines towards the 23,822–23,693 zone may attract buying interest, while a fall below 23,693 could signal further downside towards 23,465.

Source : Money Control