News

Published: October 1, 2024
Updated: October 1, 2024

Sensex and Nifty Plunge Over 1,800 Points Amid Iran-Israel Conflict and SEBI Rules: Key Insights

Massive Market Correction Amid Geopolitical Tensions

On Thursday, October 3, 2024, Indian stock markets witnessed a sharp sell-off as the Sensex and Nifty50 plunged significantly due to escalating geopolitical tensions between Israel and Iran. The BSE Sensex dropped by 1,832.27 points (2.17%) to an intraday low of 82,434.02, while the Nifty50 slid by 566.6 points (2.19%) to reach 25,230.30. Only a few stocks, including JSW Steel, Sun Pharma, and Tata Steel, remained in the green, while sectors such as real estate and auto were hit the hardest. Broader markets followed suit, with the Nifty MidCap and SmallCap indices down by over 2%.

Geopolitical Crisis Escalates: Iran-Israel Conflict Fuels Market Fears

The ongoing military conflict between Israel and Iran has severely impacted investor sentiment. Israeli strikes on a health center in Beirut, and Iran’s retaliation with ballistic missile attacks on Tel Aviv, have heightened geopolitical risks. Israel's Prime Minister, Benjamin Netanyahu, has vowed retaliation, further escalating the situation in the Middle East. This rising tension has been a key driver of the sell-off in Indian equities.

FII Selling Pressure Weighs on Markets

Foreign Institutional Investors (FIIs) have continued their selling spree in Indian markets, exacerbating the decline. FIIs have been net sellers throughout most of 2024, offloading equities worth ₹1.25 trillion. In October alone, FIIs sold shares worth ₹5,579.35 crore. Analysts attribute this to high valuations in India, prompting FIIs to shift investments to markets like China, where stocks are trading at more attractive valuations. This FII outflow has added significant pressure to Indian stock indices.

Oil Prices Surge Amid Middle East Conflict

Crude oil prices have surged over 5% in response to the escalating Iran-Israel conflict, with concerns mounting that further hostilities could disrupt the region’s oil infrastructure. Israeli warnings of potential retaliation against Iran’s oil facilities have fueled these fears. While OPEC+ has committed to increasing oil production, ongoing geopolitical tensions could keep oil prices volatile in the near term, further straining Indian markets, which are sensitive to fluctuations in crude oil prices.

SEBI's New F&O Rules Tighten Retail Participation

The Securities and Exchange Board of India (SEBI) recently implemented stricter regulations in the futures and options (F&O) market. The new rules, aimed at curbing excessive speculation by retail investors, are expected to reduce trading volumes by 30-40%. Key changes include increasing the contract size from ₹5 lakh to ₹15 lakh and mandating upfront collection of option premiums. These measures have added to the market's downward pressure, as they limit retail investor participation in speculative trades.

Technical Outlook: Key Support and Resistance Levels

Technically, the markets remain vulnerable to further declines. According to experts, Nifty failed to close above the critical level of 25,970, signaling a potential correction to the 25,600-24,600 range. While there is hope for a rebound from the 25,500 level, the resistance at 26,277 remains a significant hurdle. Traders are advised to adopt a "sell on rise" strategy until Nifty can sustain above the 26,000 mark.

Cautious Sentiment Prevails Amid Volatility

In the midst of escalating geopolitical tensions and ongoing FII outflows, Indian markets are likely to remain volatile. The surge in oil prices and SEBI’s tightening of F&O rules have added further pressure. Investors should remain cautious, as the geopolitical situation in the Middle East could lead to further market disruptions.