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New Delhi: The Indian stock market is witnessing a decline in early trading on Thursday. Today, both major indices-the BSE Sensex and the NSE Nifty-opened in the red. The Nifty 50 opened at 23,954, down 224 points or 0.92%, while the BSE Sensex opened at 76,816, down 679 points or 0.88%.
1. Escalating tensions between the US and Iran
While possible talks between the US and Iran remain stalled, there are reports of fresh escalation in tensions between the two countries.
The US is increasing its pressure on Iran. However, the West Asian country is refusing to back down.
According to a report by Fox News citing US officials, the United States Department of the Treasury has frozen more than $344 million in cryptocurrency tied to Iran to cut off Tehran’s access to global revenue streams.
Moreover, a Bloomberg report suggested that the US Central Command has asked to send the Army’s long-delayed Dark Eagle hypersonic missile to the Middle East for possible use against Iran.
Russian President Vladimir Putin has warned the US of "damaging consequences" of a new military action in Iran, a Kremlin aide told reporters Wednesday after the two leaders spoke by phone.
Sharp jump in crude oil prices also contributed to the massive selloff in the stock market. Brent Crude prices jumped to the highest levels since 2022, trading above $120 per barrel, raising the risk of inflationary pressures.
For a large oil importer like India, the situation is more alarming as it can have a serious impact on the country's growth and inflation trajectory.
The Indian rupee declined by 32 paise to an all-time low of 95.20 against the US dollar in early trade on Thursday, due to a sharp jump in crude oil prices.
The domestic currency appears set to witness its third consecutive weekly loss, having erased nearly all gains achieved earlier in the month after the central bank implemented rare measures to reduce excessive speculation.
The US Federal Reserve on 29 April kept the benchmark interest rate steady as expected. However, Fed Chair Jerome Powell's slightly hawkish tone seems to have worried markets.
Powell warned of inflationary pressures and said the impact of higher energy prices cannot be assessed at this juncture. This indicated the Fed could be in a pause mode for interest rates for a longer period.
According to Reuters, traders are expecting no rate cuts this year and even see a 30% chance of a hike by March 2027.
Foreign institutional investors (FIIs) have been selling Indian stocks aggressively, weighing on market sentiment. After buying for a few days in the middle of this month, they have again turned sellers and have been selling Indian stocks for the last eight consecutive sessions in the cash segment.
On a monthly basis, FIIs have been selling Indian stocks in the cash segment since July last year, with April's selloff exceeding Rs 62,000 crore.
