The Indian stock market continued reeling under intense selling pressure for the third consecutive session on Friday, March 13, with the benchmarks Sensex and the Nifty 50 falling by 2% each.
The Sensex dropped 1,471 points, or 1.93%, to end at 74,563.92, while the Nifty 50 settled at 23,151.10, falling 488 points, or 2.06%. The BSE 150 Midcap index crashed 2.61%, and the BSE 250 Smallcap index suffered a loss of 2.67%.
Both the Sensex and the Nifty extended losses for the third consecutive week. This week, the Sensex shed 4,355 points, or 5.5%, while the Nifty 50 lost 1,300 points, or 5.3%.
Investors lost ₹20 lakh crore this week as the overall market capitalisation of firms listed on the BSE dropped to nearly ₹430 lakh crore from nearly ₹450 lakh crore on Friday, March 6.
Stock market crash: Top five factors behind the market selloff
1. No endpoint to the US-Iran war in sight
The US-Israeli conflict with Iran, which started on February 28, continues with tensions escalating.
According to reports, the New Iranian Supreme Leader, Mojtaba Khamenei, has vowed to fight on and keep the Strait of Hormuz shut. Israeli Prime Minister Benjamin Netanyahu also issued a veiled threat to kill Khamenei and defended the military assault.
Iran is hitting ships in the Strait of Hormuz and attacking US bases in the Middle East despite US President Donald Trump’s warnings of severe consequences.
2. Crude oil above the $100 mark
Even after some easing, Brent Crude continues to trade above $100 per barrel, posing a major threat to India’s macroeconomic outlook.
Oil prices may remain volatile in the near future as long as the war in the Middle East continues, as Tehran has warned it will keep blocking the Strait of Hormuz, through which about 20% of the world’s oil usually passes.
A prolonged period of elevated crude oil prices can push up India’s inflation, further weaken the currency, widen the current account deficit, and dampen prospects of monetary easing—eventually weighing on corporate profitability and overall economic growth.
3. Rupee on record-low hitting spree
The Indian rupee has been hitting record low levels over the last few sessions. On Friday, the domestic currency fell 20 paise to close at a fresh record low of 92.45 (provisional) against the US dollar, according to PTI. This week, the rupee has declined by more than half a per cent.
While reports suggest that the Reserve Bank of India (RBI) is selling dollars to stem the currency’s decline, market experts anticipate the currency to weaken further amid sharp volatility in crude oil prices and aggressive selling of Indian equities by foreign institutional investors (FIIs).
Rupee’s weakness can further aggravate foreign capital outflows, since it reduces the returns of foreign investors. Moreover, it also raises inflationary pressure, which can lead to higher interest rates.
4. FIIs selling Indian stocks
So far in March (till the 12th), foreign institutional investors (FIIs) have offloaded Indian stocks worth ₹46,167 crore in the cash segment.
While they have been net sellers since July, the current month’s sell-off is the most intense.
Prior to March, FIIs had sold shares worth more than ₹46,000 crore only in July and August last year. Notably, March is only halfway through.
5. Deteriorating macroeconomic outlook
Market participants note that the US-Iran war may have a significant, albeit slightly longer, impact on energy prices, currency movements, and investor sentiment.
“Historical evidence suggests that conflict-led market corrections are typically short-lived.
However, the confluence of high oil prices, trade uncertainty, and AI-led disruptions warrants some caution in the near term. We expect market sentiment to remain weak, driven by oil-led inflation, if conflicts extend for a longer period,” said Kotak Alternate Asset Managers.
In India, brokerage firm Axis Securities noted that a $10 increase in oil prices could widen the country’s current account deficit by 0.35–0.5% of GDP. A 10% increase in crude oil prices can raise inflation by about 20 basis points.
Concerns also centre on a global inflation flare-up driven by elevated energy prices. That will be a major blow to market sentiment, as it may lead to tighter monetary policy by the US Federal Reserve, which could boost the US dollar and trigger further foreign capital outflows from the Indian stock market.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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