Sensex Crashes 1,500+ Points as West Asia Conflict Spooks Markets

Indian share markets were closed on Tuesday on account of Holi, with trading suspended on both the National Stock Exchange (NSE) and the BSE.

On Monday, Indian stock indices settled in the red but recovered substantially from the early losses, amid escalating tensions in West Asia. Sensex closed at 80,238.85 points, down 1,048.34 points or 1.29 per cent, while Nifty closed at 24,865.70 points, down 312.95 points or 1.24 per cent.

India VIX, which indicates volatility in the markets, were whopping 25 per cent up. Volatility Index is a measure of the market's expectation of volatility over the near term. Volatility is often described as the "rate and magnitude of changes in prices", and in finance often referred to as risk.

According to SBI Securities, a sharp spike in crude oil prices amid escalating tensions in West Asia dampened investors' sentiment on Monday.

Asian markets are also trading negative today.

Shrikant Chouhan, Head Equity Research, Kotak Securities, said, "Currently, the market is trading significantly below both short-term and medium-term averages, and on daily charts, it appears to be in a weak formation, indicating a largely negative outlook."

Ajay Bagga, a veteran financial market expert said Indian markets will look at three impacts from the Iran-US conflict.

"The first risk transmitter is higher oil prices due to the de facto closure of the Straits of Hormuz. The second is the impact on major trading partners of India in the Gulf with Indian exporters suffering due to the closure of these shipping lanes and supply chains.The third is the risk to the 9 million Indians who work in the Middle East. What happens to their lives, livelihoods , remittances sent back home. These three will be the major questions and we are frankly not knowing enough to estimate the answers to these for now. The best outcome is that the new Iranian leadership chooses survival over ideology and returns to negotiations, allows tankers to sail down the Straits of Hormuz and stop attacking GCC targets," Bagga said.

Bagga sees some buying on dips to start as extremely oversold markets start positioning for a sentiment reversal.

Financial markets turned sharply risk-off on Tuesday as mounting fears of an inflation surge rippled across stocks and bonds worldwide.

"Global equities slid as disruptions to Middle East energy supplies threatened to reignite price pressures. Crude oil gained around 5 per cent, while European wholesale natural gas surged a punishing 40 per cent, said Devarsh Vakil, Head of Prime Research at HDFC Securities.

Vakil said, "Prolonged tensions among the United States, Israel, and Iran are mounting pressure on India across its current account, inflation outlook, and currency stability. Elevated crude prices stand to raise the country's import bill, widen its current account deficit, weaken the rupee, stoke inflation, and trigger foreign capital outflows."

- ANI