Rs 7.5 Lakh Crore Selloff! US-Iran War Fears Among 5 Key Triggers Behind Sensex’s 1,400-Point Intraday Crash
The Indian stock market experienced a dramatic and painful reversal on Thursday. Benchmark indices Nifty and Sensex plunged sharply, wiping out a staggering Rs 7.55 lakh crore in investor wealth. This steep selloff snapped a three-day winning streak and sent shockwaves through the financial landscape.
The Sensex, India’s premier stock market barometer, fell a massive 1,236 points to close at 82,498. The Nifty, tracking 50 key stocks, tumbled 365 points to settle at 25,454. The crash was brutal, with the Sensex plunging over 1,400 points intraday before finding some support near the close.
This wasn’t just a minor dip. The sheer scale of the selloff was unprecedented. The total market capitalisation of the BSE (Bombay Stock Exchange) plummeted by Rs 7.55 lakh crore, dragging the overall market value down to around Rs 46.5 lakh crore. The India VIX, a key gauge of market fear and volatility, spiked more than 10% to hover near the 13.50 mark, reflecting the intense anxiety gripping investors.
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**Heavy selling engulfed nearly every sector.** Banking, metal, auto, and FMCG stocks were particularly hard hit. On the Sensex, all 30 constituent stocks ended in the red. Blue-chip names like IndiGo, Bharat Electronics (BEL), Mahindra & Mahindra (M&M), UltraTech Cement, Trent, Adani Ports, and Reliance Industries tumbled up to 3.5%. The market breadth remained sharply negative, with 2,927 stocks declining against just 1,276 advancing on the BSE.
**Experts point to a potent mix of global and domestic triggers for the crash:**
1. **Escalating US-Iran Tensions:** The primary catalyst was the heightened geopolitical risk stemming from escalating tensions between the US and Iran. Reports indicated a significant US military buildup in the Middle East, including warships, fighter jets, and aerial refuelling aircraft. This positioning suggested Washington was primed for potential military action against Iran, should President Trump authorize it. Trump had previously ordered strikes on Iran and had repeatedly warned of further measures if ongoing nuclear negotiations failed to produce a replacement for the 2018 agreement he withdrew from. This uncertainty cast a long shadow over global markets.
2. **Uncertainty Over US Fed Rate Cuts:** The future trajectory of US interest rates became a major concern. Minutes from the Federal Reserve’s January meeting revealed significant splits among policymakers. While some officials raised the risk of potential future rate hikes if inflation remained elevated, others debated the timing and necessity of further cuts. This uncertainty made US assets more attractive relative to emerging markets like India, potentially triggering foreign portfolio outflows. Such outflows can pressure the Indian rupee and tighten domestic liquidity conditions.
3. **Rising Crude Oil Prices:** Oil prices surged in Asian trade, climbing to their highest levels since January 30. Brent crude rose 24 cents to $70.59 a barrel, while US WTI gained 28 cents to $65.47. This spike was driven by fears of potential supply disruptions in the key oil-producing region due to the US-Iran tensions. Higher oil prices directly impact India’s import bill and inflation, adding further pressure on the economy and markets.
4. **Rising Bond Yields:** US Treasury yields also rose, with the 10-year yield climbing 2.5 basis points to 4.10%. This increase was fueled by solid economic data reinforcing expectations that the Federal Reserve might keep rates on hold for longer. Higher US yields make American debt more attractive, again drawing capital away from emerging markets.
5. **Profit Booking:** After three consecutive sessions of gains, investors took profits at elevated levels. This natural correction, combined with the above factors, amplified the selling pressure.
**The fallout was immediate and severe.** The crash erased years of gains for many investors and dealt a blow to market confidence. Experts like Vinod Nair, Head of Research at Geojit Investments Limited, highlighted the dominant role of geopolitical risk: “Bears dominated the Indian market as escalating geopolitical tensions between the US and Iran dampened global sentiment, triggering a broad-based sell-off.”
The combination of these factors – the looming threat of conflict, uncertainty over US monetary policy, surging oil prices, rising bond yields, and profit-taking – created a perfect storm that sent the Sensex and Nifty crashing. The market now faces a period of heightened volatility and caution as investors grapple with these complex global headwinds.
**Key Takeaways:**
* **Magnitude:** A massive Rs 7.55 lakh crore was wiped out from the BSE market cap.
* **Indices:** Sensex fell 1,236 points (1.5%), Nifty fell 365 points (1.4%).
* **Triggers:** US-Iran tensions, Fed rate uncertainty, rising oil prices, rising bond yields, profit booking.
* **Impact:** Broad-based sell-off across sectors, spike in market volatility (VIX), significant wealth destruction.
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**FAQ:**
* **Q: What caused the Sensex to crash so sharply?**
A: A combination of escalating US-Iran tensions, uncertainty over US Federal Reserve interest rate cuts, rising crude oil prices, rising bond yields, and profit booking by investors.
* **Q: How much money was lost?**
A: Approximately Rs 7.55 lakh crore was wiped out from the total market capitalisation of the BSE.
* **Q: Why are US-Iran tensions important for Indian markets?**
A: Geopolitical tensions can disrupt oil supplies, increase global risk aversion, and make US assets more attractive, potentially leading to foreign portfolio outflows from India.
* **Q: What does Fed rate uncertainty mean for India?**
A: Uncertainty over US interest rates can make US assets more attractive, potentially causing foreign investors to pull money out of Indian markets, putting pressure on the rupee and liquidity.
* **Q: What happens next?**
A: The market is expected to remain volatile. Investors will be watching developments in the US-Iran situation, US Fed policy signals, and global oil prices for direction.
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